In our June 12, 2016 posting titled “Ritchie Brother: Inflection Point?” we said the following:
“…it appears that [Ritchie Brothers] RBA is at a threshold that has not been exceeded since early 2011”
“…the stock could rise to $48.00.”
the stock needs “…some kind of reprieve from the most recent parabolic move in the price”
Since June 2016, RBA has managed to trace out the following price action (in red):
As the last bullet point indicated and the price chart has reflected, the parabolic move was resolved with a decline to the recent low of $27.27. Unfortunately, we now need another parabolic move from $27.27 to the recent jump above $35 to be resolved in some way or another.
Another item that was pointed out was the possibility that RBA could exceed a level in Edson Gould’s Altimeter, a level that had not been exceeded since 2011. The recent price action since June 2016 has allowed this to occur as well.
We’re still thinking that the rise to $48 is possible. The recent news of the acquisition by RBA of IronPlanet makes it more possible to hit our target. However, the recent price activity of going from $27 to $35 overnight based on an acquisition simply means that achieving the $48 target will take more time than we had anticipated.
The latest run for Craft Brew Alliance (BREW) from the low set in November 2015 to the most recent peak on August 2016 requires that we check for the downside targets.
A parabolic peak is one thing. However, having them play out in a consistent fashion is something else. In the case of BREW, we’ve had two prior parabolic peaks since 2008 that were true to form and function. In the period from the 2008 low to the 2010 peak, BREW declined to below the mid-range Speed Resistance Line [SRL]. In the period from the 2008 low to the 2013 peak, BREW declined below the extreme downside target. In the chart above, we have the following downside targets:
Although there is no assurance that the stock needs to decline to the referenced downside targets, any parabolic move must be watch closely as entropy will kick in at some point. In this case, we believe that the ascending conservative target is a lock. With established history as an indication, the mid-range target looks to be a safe “bet” as well. We’ll check back in on this as more time has passed.
On September 14, 2015, we posted to our site an article about Helmerich & Payne (HP). At the time we had the following investment conclusion:
“We advise that investors consider HP at the ascending $39.43 level or below.”
HP fell to the level indicated in our posting and has since increased +37% from the article date and +50% from the date of when the stock crossed below the ascending $39.43 level. Below is the updated Speed Resistance Lines and our perspective on the potential for the stock going forward.
Our site thrives on coincidence and luck. Which brings us to our posting on Medical Properties Trust (MPW) dated June 2, 2015. At the time, when the REIT was trading at $13.75, we said the following:
“In the period from July 21, 2011, MPW declined slightly below the mid level before rebounding. We expect that, at the very least, MPW should retest the current mid level at $8.45.”
Basing our work on the studies of Edson Gould’s Speed Resistance Lines, we can see that the –28% decline of MPW was a little more than slight. In fact, the drop was halfway between the mid level of $8.45 and the extreme downside of $5.14.
Since the low of $9.86, MPW has rebounded in a similar fashion as it had during the 2011 to 2013 period. There may be more upside for MPW, however, our goal is anticipation of the downside risk. In this instance, we got lucky, again.
Below are the downside targets for WD-40 Co. (WDFC) based on the work of Edson Gould’s Speed Resistance Lines (SRL).
The assumption by many momentum investors is that WDFC will continue to rise further. However, prior experience suggests that a parabolic rises usually end in a breakdown in the price. Regardless of any further rise in the price of the stock, the conservative downside target is the minimum downside target to watch for. At this time, the conservative downside target is $72.49. We’d become interested in reviewing the fundamentals when WDFC falls at or below the $72.49 level.