Below are the downside targets based on the work of Edson Gould.
The targets, as noted in the chart above are:
The $821.80 target is generally assured, from all parabolic increases of this nature. There exists the potential to decline as low as $410.90. However, we reserve this target as a backup to achieving the $562.00 price.
Posted in Edson Gould, lumber, Speed Resistance Lines, SRL
On March 3, 2015, we proposed the following:
“The coincidence of Lumber Liquidator (LL) declining significantly at the same time as the futures price of lumber (as traded on the Chicago Mercantile Exchange) seems difficult to ignore. Investors should take note of the fact that in three prior periods indicated in blue, LL has lost a minimum of –35% and as much as –53% when the price of lumber declined –33% or more.”
Since March 2015, the overall reality is that Lumber Liquidator and the futures price of lumber have more than a coincidence. For that reason, those with a high tolerance for risk and loss, we believe that critical examination of Lumber Liquidator is necessary at this time.
On August 2, 2017, when Lumber Liquidator (LL) was trading at $36.75, we said the following:
“Thus far, LL has a minimum reaction to the violent rise at the $27.03 price. However, the very fact that the stock has had such a dramatic rise in such a short period of time that a normal reaction could take the stock to $19.64.”
Since August 2, 2017, Lumber Liquidator has declined to the current price of $12.32, a decline of –66%.
We also said the following of lumber futures and Lumber Liquidator (LL):
“These reactions are in place regardless of whether the price of Lumber Futures continue higher. If Lumber Futures decline then the $12.25 level becomes an active downside target.”
From August 2, 2017 to May 14, 2018, the Lumber futures contract nearly doubled in value. However, from May 14, 2018 to October 19, 2018, the Lumber futures have crashed nearly –50% and have help push, in our view, the price of Lumber Liquidator to the current levels.
There is a clear relationship between the price of lumber and Lumber Liquidator. However, we can’t say with conviction which is the leading indicator.
See also: February 25, 2015 Lumber Liquidator downside targets.
Posted in LL, lumber, Speed Resistance Lines, SRL
On August 1, 2017, Lumber Liquidators (LL) soared +31% on news that the company had recorded their first quarter of earnings since 2015.
The staggering increase in the stock price was of particular interest to us as we had previously laid out the case that Lumber Futures contracts and Lumber Liquidators had a lot in common.
As early as February 2015, when the stock price of Lumber Liquidator (LL) was trading at $50, we had indicated that there was a risk that Lumber Liquidator could decline below $23.47. Since that time, LL had declined as low as $11.
In March 2015, we outlined our own theory of a coincidence indicator that would help investors know when the price of LL should recover. Since that time, LL has fallen in line with our theory and has subsequently increased in price along with our proposed coincidence indicator.
From the low in LL stock price in 2016, we have seen the stock price climb as much as +200%. The actual gain based on our recommended purchase price would be approximately +16% (8% annualized) assuming equal share amounts at/or below the recommended levels.
So what does the coincidence indicator say about LL and the prospects going forward? The chart below is clear on this matter:
On February 25, 2015, when Lumber Liquidator was trading at $57.23, we said the following:
“Those interested in LL and willing to perform appropriate due diligence could engage in a three phase purchase plan beginning below $39.81, $31.64 and $23.47. Investors, as opposed to speculators, should be willing to accept that there is no compensation for the wait when holding LL and that the decline to the ascending $23.47 level is a real risk.”
In fact, Lumber Liquidator blasted below the $39.81 support level and has rested at the $31.64 support level and started to move higher as seen in the chart below.
We’ve intentionally left out the move up from $38.83 to highlight the extent of the decline and the high level of coincidence with the supports levels that we had outlined in the previous month. All that remains is the decline to the $23.47 level.
While famous short-sellers have the ear of influential media to talk their book and ensure their profits, we only have price action to work from. For this reason, it is well worth noting another coincidence that relates to Lumber Liquidator and futures price on lumber as seen in the chart below.
The coincidence of Lumber Liquidator (LL) declining significantly at the same time as the futures price of lumber (as traded on the Chicago Mercantile Exchange) seems difficult to ignore. Investors should take note of the fact that in three prior periods indicated in blue, LL has lost a minimum of –35% and as much as –53% when the price of lumber declined –33% or more.
So far, from December 2013 to March 2015, the price of lumber has declined –23% while LL has declined as much as –67.49%. Much of the decline in LL has been exacerbated by concerns related to quality and sourcing of the flooring. However, the current decline is only slightly out of alignment from what has happened in the past.
We say slightly because we’re excluding the peak in lumber at 395.50 when LL was trading at $62.19. While lumber was trading lower and not to exceed the $395.50 (considered a bear market), LL gained another +92.05%. If Lumber Liquidator’s decline was measured from the February 15, 2013 peak in lumber at $395.50, the decline in the stock price would equal –37.56%.
Assuming we aren’t on the cusp a new bear market, the decline in LL has been overdone and an individual willing to accept the downside risk to $23.47 should consider implementing a three phase purchase plan. An investor must keep in mind that the conservative upside target is $80.53 which is the new “limit” for the stock instead of the previous $119.44. In addition, the downside targets now act as upside resistance level as was the case when LL could not sustain the $53.68 level prior to the recent collapse.
Posted in Edson Gould, LL, lumber, speed resistance line, SRL