The stock of Illumina Inc. (ILMN) is experiencing some major moves to the downside since peaking in July 2015. After the high of $242, Illumina has declined -39%. As a component of the Nasdaq 100 index, we think that ILMN is worth watching to see if it achieves any of the downside targets that are outlined by Edson Gould’s Speed Resistance Lines (SRL).
According to the SRL, Illumina has the following downside targets:
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$129.58
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$105.19
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$80.79
Already with today’s decline of –10%, ILMN has fallen within 11% of the ascending $129.58 level. With any luck, we could seen ILMN achieve the $105.19 level which would be ideal for initiating a three-step purchase plan.
According to Value Line Investment Survey dated August 21, 2015, ILMN has a fair value of $115.60 based on 2014 cash flow and $160 for 2015. Value Line has 2018-2020 fair value pegged at $320, however, this could be a measure of exuberance for the company’s dominate position in gene sequencing while forgetting that a stock can get significantly overvalued. As noted in the chart above, Value Line gave their highest timeliness rating of the stock only weeks before the peak in the price so we’ll remain cautious about the prospect while looking for opportunities as the price declines further.
As a reminder, the SRL is for the purpose of anticipating the decline in a company of interest so that adequate research can be done between now and the expected decline. If the downside target is achieve, ideally the extreme downside target, then the company can potentially be acquired at an exceptional price and value.