Verizon (VZ): This Is How Elliott Waves Help You Manage Risk
"Cut your losses short," sure – but where, exactly? Here's one way to know
by Nico Isaac
Updated: December 21, 2017
For every market, there are almost as many opinions about where that market is headed as there are people analyzing it.
Take, for instance, the mobile service giant Verizon Communications, Inc. In the last week alone, those predicting the future of the company's stock (NYSE: VZ) have-- well-- gotten their signals seriously crossed. To wit:
- VZ is bullish: "Verizon Communications Inc. stock appears set for big things in 2018. Things are looking up." (Nov. 20 USA News)
- VZ is bearish: "Why Verizon's Stock Price Jumped Too High Too Soon" (Dec. 8 Nasdaq)
- No, wait. VZ is bullish again: "Hunting for the Best Stocks? Check out Verizon" (Dec. 21 The News Journal)
- Sorry, spoke too soon. VZ is bearish: "Running Out of Momentum?-- Verizon Communications" (Post Analyst Dec. 11)
This is where we're supposed to say how Elliott wave analysis is the total opposite; that it always shoots straight and every interpretation of price action occurs as expected.
Well, we can't say that. The fact is, our analysis doesn't guarantee one surefire outlook for prices, either. But it does provide a way to know whether the original outlook is wrong -- often, before it's too late.
Here's how: Every single preferred Elliott wave forecast has a built-in alternate wave count; that "life raft" you jump into in case the preferred interpretation of price action is wrong.
One way an alternate scenario can get triggered is when the market breaks through a critical support or resistance price level --
- Support levels are below the current price action (which signifies a bullish stance). If prices drop below these levels, you know your bullish stance is not working out.
- Resistance levels are above price action; they are "lines in the sand" whenever you have a bearish stance. If prices rally above these levels, again -- that's your "risk."
Let's go back to VZ to see how our Trader's Classroom instructor Jeffrey Kennedy used support levels to manage risk in this popular stock.
First, in the October 18 Trader's Classroom Jeffrey identified a significantly bullish Elliott wave count on the price chart of VZ. However, Jeffrey emphasized how the rally hinged on prices staying above critical support at 45.71 -- or, a "much larger decline" would ensue.
Days later, prices did fall below support, dismantling Jeffrey's bullish count and clearing the way for further decline.
A week later, in the November 16 Trader's Classroom Jeffrey revisited VZ to highlight the risk-managing value of critical price levels and showed a new near-term wave count for VZ-- another bullish set-up dependent on prices obeying another critical support.
From there, VZ did stay above critical support en route to a powerful 20% rally to one-plus year highs.
Take a few minutes to watch these clips from our October 18 and the follow-up November 16 Trader's Classroom lessons to hear Jeffrey steer the risk-management ship through VZ. Press play and enjoy!
The chart below shows you exactly where the Oct. 18 and Nov. 16 Trader's Classroom lessons on VZ occurred alongside its price trajectory:
When it comes to receiving objective market analysis -- one that also includes vital criteria for minimizing risk -- our Trader's Classroom has one question: "Can you hear us now?"
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