Below are the downside targets for Align Technologies (ALGN) based on the high of $392.98.
The price movement of ALGN from the 2008 low to the current level is staggering. This partially explains why the reaction is, and should be, devastating for those who bought the stock within the last several months. Our experience has been that the $156.64 will be achieved, at minimum.
Posted in ALGN, Edson Gould, Speed Resistance Lines, SRL
In after-hours activity, Advanced Micro Devices (AMD) had declined approximately -17% from the closing price of $22.79 to $17.69.
The history of AMD suggests that the stock will decline as low as $6.30 and possibly to the sub-$2.00 level. For the time being, we have outlined the following downside targets:
Posted in After Hours, AMD, Edson Gould, Speed Resistance Lines, SRL
Below are the valuation targets for ABM Industries (ABM) for the next 10 years. Continue reading
W.W. Grainger (GWW) is a stock that we currently hold and has run-up significantly in the last year. In this post we will review Edson Gould’s Speed Resistance Lines [SRL] and Altimeter for GWW.
Speed Resistance Lines are most often used by us to estimate downside targets. Based on the increase from the August 28, 2017 low and the August 21, 2018 high, we have arrived at the following downside targets.
It should be noted that the chart above does not include the extreme downside target. If the August 21, 2018 price is the peak then our best guess is that GWW will decline below the August 28, 2017 low. Our interpretation on the SRL may not play out for a while, however, the Altimeter adds significant insight.
Posted in downside, Edson Gould, GWW, Speed Resistance Lines, SRL
According to Morningstar.com, Harsco Corp. (HSC) “… provides industrial mill services to steel and nonferrous metal producers in more than 30 countries, including the United States.”
The history of Harsco’s (HSC) price history is important to the current activity in the stock price. In the review, we cover the history of the stock price based on the Edson Gould’s Speed Resistance Lines [SRL] with Dow Theory.
Downside Target Review
In the period from 1982 to 1990, the price of HSC rose from a low of $2.50 to a high of $9.66. Based on this information, we arrived at the following downside targets:
We’ve highlighted the point made in Dow Theory that a stock will often retest a previous low after a prior peak in the stock price. In this case, the retest level was the $5.88 price which was ultimately penetrated to the downside to the ultimate low of $4.50 in 1990.
In the period from 1990 to 2000, HSC had the following downside targets:
The Dow Theory retest after a major decline lasted over a period of two years from 1998 to 2000. All of the downside targets were achieved.
In the period from there was a decline that appears worth mentioning because it occurred within a rising trend that culminated in peak price that was three times the 2002 high. In the runup from the 2000 low to the 2002 peak, HSC had the following downside targets:
The Dow Theory retest after the peak was consistent and could have been at either of the two points indicated on the chart. If you missed the first indicator then you had a second shot at getting the retest at the second major low in the stock.
Worth pointing out is the fact that the extreme downside target of $7.33, from a technical standpoint, was suggesting much lower levels than could be indicated on this chart. We wonder if the low of HSC in 2016 at $3.67 might have been indicated in the SRL of 2000 to 2003.
2000-2018: Upside and Downside Targets
Below are the upside and downside targets based on the low of 2000 to the peak of 2016.
According to Yahoo!Quotes, Advance Auto Parts (AAP) “… provides automotive replacement parts, batteries, accessories, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks.”
Below are the downside support targets based on the high of $199.38 and the upside resistance targets based on the $79.26 low.
Posted in 50% principle, AAP, Edson Gould, Speed Resistance Lines, SRL
According to Yahoo!Finance, ShotSpotter Inc. (SSTI) is, “…provides software-as-a-service based gunshot detection solutions for law enforcement officials and security personnel in the United States, South Africa, and internationally.”
ShotSpotter IPO’d on June 7, 2017 and was priced at $11. In the last 15 months, SSTI has managed to increase the share price +471%. Based on the closing price of $62.81, we have the following downside targets:
The downside target for SSTI are included in case the stock were to double for the current level. SSTI could increase to $85.65 and still be within range of the $35.06 downside target.
Posted in Edson Gould, parabolic, Speed Resistance Lines, SRL, SSTI
AeroVironment is described on Yahoo!Quotes as:
“AeroVironment, Inc. designs, develops, produces, supports, and operates a portfolio of products and services for government agencies and businesses.”
Below are the downside targets as a consequence of the parabolic rise that has occurred since the September 2015 low.
The conservative downside target of $62.26 is a lock in our view. To put this in perspective, AVAV would have to increase to $160.62 before the $62.26 level isn’t a normal “dip.”
Posted in AVAV, Edson Gould, parabolic, Speed Resistance Lines, SRL
Review
On February 6, 2017, we took a position in Dentsply Sirona (XRAY). Dentsply Sirona is a leading manufacturer of dental products provided to dentists throughout the world. By February 8, 2018, we said the following of XRAY:
“At the time of the purchase of XRAY on February 6, 2017, we sold our shares of UNM Group (UNM) which had increased exceptionally from the February 5, 2016 purchase. XRAY did not meet our goal [gaining +1.14%] and while UNM has gained +5.19% in the same period of time.”
On February 8, 2018, we sold our holdings of XRAY and the stock has subsequently declined –31.30%, a staggering loss in such a short period of time.
Downside Targets
According to Charles H. Dow, co-founder of the Wall Street Journal, a stock should be viewed from the context of when it last performed the worst. Dow has the following to say (emphasis ours):
"The point of importance for those who deal in industrial stocks is whether the capitalization of the companies into which they propose to buy is moderate or excessive, when compared with the aggregate earnings of the various concerns forming the combination in a period of depression. It is probable that consolidated companies will be able to earn as much in the next period of low prices as the companies forming the combine were able to earn in the last one; hence the very foundation of investments in industrials should be knowledge of what these companies earned, say in 1893 to 1896, making, perhaps, reasonable allowances for economies under consolidation. Where the earnings so shown would have provided dividends for industrials now active, the fact must be regarded as a very strong point in favor of those stocks (George W. Bishop Jr., Charles H. Dow: Economist, Dow-Jones & Company,Princeton, 1967, page 11.)"
Without seeing the reported earnings, dividends, debt and shares outstanding, the price of the stock is the best quick take on the downside risk. In theory, the price reflects some or all of the news and fundamental data on a given stock. Looking at the price and applying the work of Edson Gould, we have estimates for the downside target.
Below are the downside targets for Starbucks (SBUX) based on the work of Edson Gould.
On June 16, 2012, we posted the following commentary on The Buckle Inc. (BKE) when the stock was trading at $36.79:
“We are very interested in this stock at the right price. We believe that BKE will be a buy at $30 and below. However, prior price movement based on Gould’s speed resistance lines indicated that the conservative downside target is $24.47 and the extreme downside target of $16.68.”
Since that time, The Buckle (BKE) managed to increase as high as $56.07 by January 12, 2015. However, since January 2015, BKE fell as low as $13.70 on August 2017, on a closing basis.
One of the fascinating elements of the work of Edson Gould is that it can be extremely accurate in spite of incomplete data. When we ran the figures for downside targets, BKE’s peak price was $48.39. The peak price is part of the equation that helps to generate the downside targets. In spite of this fact, BKE managed to decline below the extreme downside target based on the speed resistance lines (SRL).
Posted in BKE, Edson Gould, Speed Resistance Lines, SRL
In a USA Today article titled “Dow hitting 50,000 by 2023? Market milestone is within reach, investor claims”, money manager Charles Lemonides says, “…investors ‘should build their portfolios recognizing Dow 50,000 is a real possibility’ by 2022 or 2023.”
This prediction sounds spectacular and harkens back to our January 3, 2018 article titled “Dow 130,000 by 2032.” That article was premised on our November 2012 article suggesting that the secular bear market would end between 2016 and 2023. After further analysis, in March 2013, we concluded that “…If the current implications are correct, we could be on the cusp of a run to Dow 100,000.”
What stands out about Lemonides’ forecast for the next five years? While we were projecting a +12% compounded annual growth rate, Lemonides is forecasting a +15.09% compounded annual growth rate over the next five years. If the +15.09% growth rate is projected out to 2032 then the Dow Jones Industrial Average would sit at 177,200.
On May 3, 2018, it was reported that Cardinal Health (CAH) declined –21% due to:
“…the company's loss of a contract with PharMerica and lower drug prices are responsible for the bearish outlook (TheStreet.com).”
The impact of these issues has resulted in lower 2019 earnings estimates for CAH. Below are some thoughts on our expectations for CAH in the coming year.
On April 2, 2018, when Bitcoin was trading at $7,049, we said the following:
“The $9,148.23 level is the point where we believe the price of Bitcoin could rise to before a retest of the $11,479.73 level, if remotely possible. Based on the recent volume characteristics, we think that the $9,148.23 is in the works.”
As of April 27, 2018, Bitcoin is priced at $9,278.22 and has achieved our target of $9,148.23 as outlined in Dow Theory.
The April 2, 2018 assessment came after our February 17, 2018 review when Bitcoin was trading at $11,092.15 and we said the following:
“…before a new high (substantially above the $19,343) is achieved, we expected a retest of the $6,914.26 level (or something close, like, $7,000-$7,200).”
On April 6, 2018, Bitcoin declined as low as $6,620.41. All of the assessments have been based on the work of Charles Dow’s Dow Theory and Edson Gould.
Below is the updated assessment of where Bitcoin is headed from here.
Posted in Bitcoin, Dow Theory, Edson Gould
The Dow Altimeter, as constructed by Edson Gould, is based on dividend payments made by the constituents of the Dow Jones Industrial Average (DJIA) as reported in the Barron’s section titled “Indexes PEs and Yields.” The Dow Altimeter information provides a graphical representation of fundamental data.
On January 23, 2018, we said the following:
“While the market appears destine for higher ground, it is worth noting that the 24,223 level is the new support level for the DJIA. If the DJIA fails the support level at 24,223 then the next stop is the 18,373 level.”
Below we have updated the Dow Altimeter and included the coincidence of buy indications based on the dividend history of the Dow. We believe this history of dividend payments provides strong evidence of when a bear market has come to an end along with a fair estimate of when a recession should come to an end.
A recession and a bear market is coming. We don’t know when, however, we can prepare ourselves with the necessary insight to better call the bottom (better than our July 2009 call for the stock market, our August 2009 call for the end to the recession and our December 2010 call for the bottom in real estate.