On September 10, 2015, we posted an article which reviewed the fundamentals of Dover Corp. (DOV). Our conclusion on the stock was as follows:
“Considering that there are only two remaining downside targets, the downside risks are “contained” for the most part. At most, we think that the next downside target is at the ascending $38.51 level. A two stage purchase plan should be entered into at the below the ascending $46.87 and $38.51 levels ($56 and $44, respectively).”
Since September 2015, the following is the updated Dow Theory chart that was referenced in the above quote:
What should stand out is the fact that once DOV declined below the ascending $46.87 downside target, losses have been contained. Subsequently, Dover has risen to the current price of $70.97. Our best guess is that DOV is facing resistance at the ascending $59.40 line (approx. $80).
As best we can tell, the use of Dow Theory could be coincidental to what ultimately happens to the stock. However, depending on the quality of the stock (ideally blue chip stocks), Dow Theory is an appropriate tool for consideration of downside risk.