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.
On June 13, 2016, Microsoft announced that it was going to acquire LinkedIn Inc. (LKND) for approximately $26 billion.
Based on our prior work, LinkedIn Inc. (LKND) has helped to make Edson Gould’s Speed Resistance Lines (SRL) one of the most interesting indicators to watch when it comes to a stock that has established a declining trend. On April 30, 2015, we said the following of LinkedIn:
“In the prior decline, LNKD fell to slightly below the midpoint target at $133.19. This suggests that the current slump should go below the conservative downside target of $187.68. Going below the $187.68 level should get the stock price to the ascending midpoint target of $139.87. Those interested in LNKD should consider the stock in stages at or below the ascending $139 level with an acceptance of a decline to the ascending $92.06 level.”
LNKD did decline below $187.68. However, rather than decline to the $139 level as anticipated, the stock price declined directly to the ascending $92.06 level. At the time, for anyone serious about investing in LNKD, the dramatic after-hours decline from above $187 to below the $139 level indicated that LNKD was an open target for consideration.
Below is LinkedIn’s stock price based on Edson Gould’s Speed Resistance Lines.
Now that Microsoft (MSFT) has decided to absorb LinkedIn, we believe this SRL has served our analysis purposes well. We continue to maintain that Gould’s SRL, when applied to the appropriate stock, has delivered the most fascinating results.
On January 8, 2016, we posted the following chart:
That red line that says 150 was our projected downside target based on the historical average from as far back as 2004. The update to this chart is below (Altimeter levels adjusted for dividends):
Apple is on the cusp of hitting that downside target. What happens if the stock breaks through on the downside, then you’d want to consider the investment merit of the stock based on conservative fundamental data. Keep in mind that the current P/E ratio of 10 should jump before the stock marches higher.
Do you remember that article we posted on September 23, 2012, about how adding Apple (AAPL) to the Dow Industrials would be “not so great”? Yeah, well, since being included into the index on March 19, 2015, Apple has declined –28% and the company that it replaced, AT&T (T), has increased +19%. True to form, the inclusion of Apple into the Dow Jones Industrial Average coincides with decline in the stock price. The adjustment period should be coming to an end. Let’s see how this plays out.