In spite all of the uncertainties that have hit the headlines, the stock markets refuse to die. Case in point is this week’s recovery from the war incident with Iran. Hours after rockets were falling on American troops in Iraq, stocks made new all-time highs. So, the bulls are in charge until we get a black swan event, and today, we’re taking a look at Verizon (NYSE:VZ) stock to see if it is a good bet at these levels.
The question of timing is almost never a straightforward answer. Finding perfect entry points into Verizon stock depends on the individual investor time frame. For someone who is looking to stay long far into the future, it is futile to try and time a few dollars above or below current price.
Just buy the VZ shares and manage the risk from a long-term perspective. Starting with a partial position makes sense, as this leaves room to average down if price goes against it.
However, most traders would rather get started on the right foot. No one ever plans on buying a stock knowing it’s going to fall first before it rallies. In this case, the Verizon stock chart suggests that there are important levels here that could help with that decision. But first, let’s check on its state as of now.
Fundamentally, VZ is cheap. It sells at a reasonable 15 price-to-earnings ratio and 1.9 time sales. Furthermore, it pays a 4% dividend, which is much more than what anyone can get from bank deposits these days. Nonetheless, Verizon stock is almost flat in 12 months while T-Mobile (NASDAQ:TMUS) and AT&T (NYSE:T) are up 18% and 29%, respectively, over the same period. Clearly, VZ has some catching up to do.
The Particulars of Verizon Stock
For the past 12 months, VZ has tried in vain to break out from the $61 zone. It failed in late March, and then again in May — which led to a 9% correction to around $54 per share. Verizon stock did rebound sharply from it only to fall back to it again within two months. However, this time and in early September, Verizon stock finally sprang off a double bottom and rallied 14% into the December highs.
Since then, VZ gave back about 5% of that rally, but therein lies the actual opportunity here. We already know that it needs to catch up with its competitors, so this is the dip to buy even if it won’t turn out to be perfect. Verizon stock has fallen back into an area of proven support.
For the last 3 months, it has successfully tested the area around $58.50 per share several times — so the bulls can rely on it as a proven platform until it fails. Even then, though, Verizon has stronger support above $56 dollars per share. Since they don’t ring bells at perfect trade times, this level in Verizon presents a reasonable starting point for anyone looking to invest in the stock. This works for midterm, as well as long-term prospects.
Verizon Stock Has History With This Level
While Verizon has an excellent reputation, its clients are hardcore fans of it and therefore are loyal. And, unlike AT&T and T-Mobile, VZ is not a slave to the heavy-promotions game. Nonetheless, there is low-odds danger lurking, but with potentially grave consequences that are worth mentioning.
Taking a look back to the dot-com bubble era, we see that Verizon stock tripped hard from these levels here. However, the same chart also shows that $52 is a very long-term level in contention — so it will lend support. Meaning, there is no chasm awaiting investors and there will be plenty of time to gather protection if needed. So, I expect that the recent lows will serve as a base for future higher prices.
The other blatant risk here is the fact that the entire stock market is at all-time highs while there are a lot of potential threats still looming. So from that perspective, if the whole stock market corrects from a black swan event, then so will Verizon stock. However, this is not the assumption today. The buyers are in charge inside the current macroeconomic conditions! So, owning Verizon stock makes a world of sense.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
