The recent outperformance of Verizon and AT&T is not the kind of leadership that typically accompanies a durable growth cycle.

Both names posted mid-to high-single-digit gains over the past month, while many of the growthier, internet, and entertainment stocks that dominate the State Street Communications Services Select Sector SPDR ETF (XLC) have lagged or declined.

Verizon is up 26% year to date, comfortably outperforming flashier sector peers like Alphabet, up 10%, Meta Platforms, up 2%, and Netflix, down 17%.

Because Verizon and AT&T together account for roughly 10% of the XLC, their rally has been enough to lift the sector ETF 1% over the last month, second only to energy among the major S&P sector funds, even as the S&P 500 has slipped almost 3%.

That ranking looks impressive on a screen, but it is driven by two mature, high-yield telecoms. When the defensive, low-growth pair is carrying the group, it usually signals that investors are seeking yield and stability, not pricing in stronger economic or earnings momentum. That's not a good overall sign for the stock market.

One can reasonably hide out in Verizon and AT&T until the midterms in six weeks, and beyond if the technicals that are in place remain. Both stocks offer high, well-covered dividends, relatively low-beta, and a customer base that does not disappear when the political calendar turns noisy.

Now lets look at the charts for Verizon and AT&T, the part of the story that still justifies the optimism.

Verizon, a major U.S. telecommunications company, pays a dividend yield of 5.5%. The stock is up 2% this week heading into Wednesday and is on a nine week winning streak. The stock was kicked out of the Dow this summer, and it is trading right at fresh four year highs.

Looking at Verizon's daily chart, the stock has handily outperformed the XLC, over the last year as seen on the ratio chart. Price action has reclaimed the very round $50 level, where bulls will look to clear resistance and avoid forming a double top against March's topping cluster of doji, shooting star, and bearish engulfing candles.

At the lows of this recent structure, candlestick signals foreshadowed a clear low. A spinning top on July 2 successfully filled the gap from Jan. 29, followed by a three-day doji cluster between July 8-13 that confirmed strong bottoming action.

Following that base development, Verizon decisively cleared its $49.11 double-bottom-with-handle pivot on Aug. 19. With the price now holding comfortably above this breakout level, the stock projects an upside target of $61 by early 2027, a 20% gain from current prices. Remain bullish above $47.

Verizon was trading around $50.50 Wednesday.

Turning to AT&T, the ratio chart shows significant lag behind telecom peer Verizon over the past year. While Verizon trades right at its 52-week high, AT&T remains 10% below its own peak, though it offers a supportive 4.1% dividend yield.

Technical trouble initially began after AT&T broke below a bull flag just below the $30 handle. Selling pressure finally abated at the very round $20 number, where a July 2 spinning top marked the low of a classic bullish inverse head-and-shoulders pattern. The stock subsequently confirmed the trend reversal with a breakout above the $25.50 neckline pivot in late August.

That breakout was recently retested and held firm; price action found robust support at its 200-day simple moving average last week. This successful retest opens the door for AT&T to target $32 by year-end, a 20% gain from current levels. Remain bullish above $25.

AT&T is trading around $26 Wednesday.

Doug Busch is the senior technical analyst at Barron's Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.