‘Sell at former tops' is an old Wall Street adage, and it may prove to be good advice for Verizon Communications Inc. (NYSE:VZ), which is currently quiet. The shares gained almost 15% Friday after a blowout earnings report. This is why the telecom is our Stock of the Day.

The expression refers to how stocks tend to run into resistance at levels that had been peaks or tops in the past.  When this happens, there is a chance the stock will reverse and head lower.

Stocks can find resistance at former tops because of remorseful or regretful buyers. These are people who purchased shares at the top and later realized they had made a mistake.

A number of these investors and traders choose to hold on to their losing positions. But they also decide to exit at breakeven if they eventually can.

So, when the stock rallies back to the price that had been the top or peak, they place sell orders. If there is a large quantity of these orders, it can result in forming resistance.

As you can see on the chart below, Verizon formed a top around $44 last March. When the shares returned to this level in August, they encountered resistance and formed another top. Remorseful buyers from March, placing sell orders, created resistance.

Not surprisingly, Friday's move higher ended around the $44 level. It may be a top again.

Stocks can sell off after they reach resistance. This can happen when some investors and traders who created the resistance by placing sell orders become anxious and impatient.

They are afraid that other sellers will undercut their prices. They know the buyers will go to whoever is willing to sell at the lowest price, and they don't want to miss out.

As a result, they reduce their offer prices. Other anxious sellers see this and do the same. It results in a snowball effect that can push the price lower.

Verizon may once again prove the old adage of selling at former tops to be good advice.

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