We are inclined to close out our recommendation in Splunk (SPLK) due to a short-term overbought downturn following its bounce. These are becoming more commonplace in high-growth names.
With elevated market volatility expected throughout this year, we recommend more defensive positioning, which can be achieved via Verizon (VZ):
VZ was a major laggard in 2021, a year in which the broader market stair-stepped higher with little volatility. However, a more difficult tape this year could actually benefit beleaguered names like VZ, at least in terms of relative performance.
There is evidence of a turnaround in VZ as it comes off long-term oversold levels on improved momentum after holding important support defined by the monthly cloud model (not shown) near $52.
Within the longer-term context, VZ has seen short-term momentum improve and is now testing resistance at its 200-day (~40-week) moving average. There is a bullish “pop” in the weekly stochastics that supports a breakout in a bullish long-term development.
We intend for this idea to have long-term shelf life, so we are recommending a targeted level near $62, defined by strong long-term resistance going back to 2018. A stop-loss can be placed below the January low to manage risk.
Verizon (VZ, $53.79)
Target: $61.60
Stop-Loss: $50.80