by Pinchas Cohen
Verizon (NYSE:VZ), the telecommunications and entertainment giant, is scheduled to report Q3 2017 earnings this coming Thursday before the market open.
Consensus EPS forecast for the quarter is $0.97 versus $1.01 EPS for the same quarter last year, on revenue of $33.06 billion revenue versus $34.13 billion for the same quarter last year.
The company’s long-term revenue base is in question and its margins are shrinking. Currently, revenues are predominantly derived from wireless equipment and especially services.
Consensus expects this quarter’s decline to slow to 'just' a negative 5.8 percent YoY. When this happens it may mean that the company is turning around. Or not.
Whatever the case, it also suggests that the concurrent decline in the company's stock price till now may also slow down.
The post-2008 crash was followed by an uptrend since October 2008. As we can see, that trend remains intact.
We also see that while the price in July eked out a higher peak than the previous peak in 2013, officially keeping the trend alive, a gain of less than 5 percent in 4.5 years—while the S&P 500 climbed 65 percent during that same period—just doesn’t cut it, and certainly doesn't provide any real reason to be confident of Verizon’s continued uptrend.
Moreover, despite the aforementioned possibility of a slower decline in revenue, which might suggest a recovery is underway, the price of the stock actually entered a downtrend in the medium-term, as can be seen visually via the falling channel. That spells out the balance of supply and demand, which may or may not include “informed money,” people within a small circle who know more than the public.
Specifically, since mid-June the short-term rise was within the shape of a rising wedge, which holds bearish implications, signaling short-term over-eager sentiment among buyers, even while supply is drying out. Note that the apex of the wedge is pointing at the channel-top, where supply overruns demand.
Trading Strategies
Conservative traders should not trade against the primary trend, which is still up.
Moderate traders may take the risk of a short, after the price confirms the resistance of the channel-top, or alternatively after a decisive close beneath the bearish rising wedge.
Aggressive traders may risk a long position, with a stop loss beneath yesterday’s $47.71 low, and rejoin the medium trend with a short, as it nears the $50 level.