Category Archives: Edson Gould

Technical Take: LL & SAM

Below are the downside targets using Speed Resistance Lines [SRL] for Lumber Liquidator Holdings (LL) and Boston Beer Company (SAM) based on the work of Edson Gould.

Lumber Liquidator (LL) has declined from the peak of $119.44.  Gould’s SRLs suggest that from the peak price, LL has a conservative downside target of $53.68 and an extreme downside target of $39.81.

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On February 25, 2015, LL was unable to sustain a price above the ascending $53.68 level with a decline of over –17%.  Our best guess is that LL will decline to the ascending $39.81 level, which currently approximates $49.50 price.  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.

Boston Beer Company (SAM) is the brewer of Samuel Adams beer and a multitude of other “craft” beers.  Today SAM declined –10% on an earnings miss.  Below is the SRL for SAM.

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Our expectations for SAM are not very high as the last time that the stock was able to achieve the conservative downside target of $70.13 was in 2011.  Since that time, SAM has faltered but not fallen.  In spite of this fact, we’ve outlined the conservative downside target of $180.12 and the extreme downside target of $107.99.  Investors should note that a decline to the ascending $180.12 level is an ideal buying target with a follow-up purchase below $141.25.  As with Lumber Liquidators, SAM is bet on growth in the stock price and not much else. 

The relative strength of each company (long-term viability) is what makes these stocks compelling and worth considering at the appropriate predetermined price.

TripAdvisor Running Away From Buyers

On February 12, 2015, news of Expedia (EXPE) buying Orbitz (OWW) combined with the earnings release by TripAdvisor (TRIP) has resulted in OWW increasing +21.83% while TRIP has increased by +23.76%.  This cannot be good news for Priceline (PCLN) shareholders as the likelihood of the company overpaying for TRIP grows.

Our February 6, 2015 Nasdaq 100 Watch List had the following review of TripAdvisor and Priceline:

A couple of stocks that have caught our eye are Priceline (PCLN) and TripAdvisor (TRIP).  Both stocks are low in price relative to their March 2014 peaks. 

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There has been some recent talk about PCLN absorbing TRIP in a buyout.  Below is the relative price difference between PCLN and TRIP.  In the last year, mid-November 2014 was the best time for PCLN to leverage the stock price to buy TRIP while July 2014 was the worst time to use stock to buy TRIP.

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While PCLN has changed on a relatively small basis over the last year, Ctrip.com (a company that we correctly analyzed on December 2011) has had a tremendous amount of relative price change over TRIP in the last year.

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While TripAdvisor (TRIP) may not be the best investment over Priceline (PCLN) on a fundamental basis, the potential for a buyout of TRIP may make good investment sense due to the need to eliminate a competitor or to take advantage of existing clients, assets or infrastructure.  Things could get worse for the market overall, pushing all of the stocks in the sector down. Barring a general market correction, investors probably have until the middle of December 2015 for a deal to be hammered out if the stock price doesn’t recover from the current levels.

We remain confident that TripAdvisor is the best relative value in the competition elimination game for the sector.  In reality, Ctrip.com acquiring TRIP is very unlikely.  However, we believe that with the recent jump in the price of TRIP, Priceline will feel the burn and get into a rampant bidding war for TRIP.  This could result in TRIP being acquired for well above the most recent 52-week high of $110. 

Below are the downside targets along with the conservative/extreme upside targets for TRIP based on Gould’s Speed Resistance Lines.  Non-members of our site wishing to view the upside/downside targets can send an email to nlo@newlowobserver.com.

Qualcomm Chokes and Other Thoughts

On January 29, 2015, Qualcomm (QCOM) announced that a “…key customer passed on new chip…”  On the news, QCOM stock fell as much as –12%.

Royal Gold: SRL Update

On October 12, 2012, we posted the following SRL for Royal Gold:

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We said the following of the above chart:

“The SRL for Royal Gold at $44.62 doesn’t seem outlandish given what has already occurred in the previous declines from prior peaks.  The X marks the first decline after a “minor” parabolic move that was later exceeded on a larger scale to point A1, B1 and C1.  Additionally, the  X reflects the minimum retracement from the top and has provided consistent support for the price for RGLD.

“We’d consider buying RGLD if it declines to either of the support levels of X3 or C2.  The movement of RGLD has been consistent with the price of gold (GLD) which is in stark contrast with gold stocks as represented by the Philadelphia Gold and Silver Stock Index (^XAU)....”

On July 12, 2013, we said the following of RGLD:

“RGLD has fulfilled almost all of our expectations for downside risk since October 2012.  Although we’d much rather see this stock reach the extreme downside target of $33.28, we feel that purchases at the current level and below would be consistent with asset accumulation and wealth building, in contrast to those who were considering the stock at or near the October 2012 levels.”

So far, Royal Gold has adhered to the SRL outlined on October 12, 2012 and July 12, 2013 as displayed in the chart below.

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Royal Gold has a mid-range upside target of $100.39 and an extreme upside target of $133.85 based on Gould’s Speed Resistance Line.  However, the upside targets are somewhat immaterial when considered from the context of buying based on values.

Clean Harbors Update

On February 9, 2012, we posted Edson Gould’s Speed Resistance Lines (SRL) for Clean Harbors (CLH) with the downside risk for the stock.  At the time, the downside targets were:

  • $43.53 (conservative downside target)
  • $31.00 (mid range)
  • $22.53 (extreme downside target)

Since that time, we’ve revised the downside targets to reflect the following minor changes.

  • $43.97 (conservative downside target)
  • $33.70 (mid range)
  • $23.43 (extreme downside target)

A visual of the downside targets reveals the value of Gould’s SRL.

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So far, CLH has adhered to the SRL that was initially outlined in 2012.  If we consider the period of 2007 to 2009, when the stock fell as low as $20.54 and extend that same decline to the current period, then CLH could decline as low as $41.40.  This assumption is predicated on the stock market not experiencing a precipitous decline from the current level.  A broad market decline would easily bring CLH to the ascending $23.43 level in the SRL. 

While the fundamentals are not glowing for CLH as it goes through the process of spinning off its oil and gas services unit, which could “…take more than a year for the spinoff to be completed…”, there are expectations that the current actions will refocus the company.

Speculators, those willing to accept the downside risk of –36%, could purchase CLH with 25% of intended funds at $45.10 and $41.40.  The final purchase would be at $31.00 or below.  Investors, those willing to hold for 5 years or more, would want to re-assess CLH at $34 and below.