Category Archives: Edson Gould

Gilead Sciences, On Target

On November 16, 2015, when Gilead Sciences (GILD) was trading at $99 per share, we posted the following long-term downside targets for  the stock:

  • $56.93
  • $49.03
  • $41.12

At the same time, we contrasted our downside targets with commentary from TheStreet.com to ensure that there was some balance to the perspective for our readers.  TheStreet.com said the following of GILD:

“We rate GILEAD SCIENCES INC (GILD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. (TheStreet.com. Gilead Sciences (GILD) Stock Is the ‘Chart of the Day’. Albright, Amanada. November 16, 2015. ”

image

It is worth noting the buy rating that we gave to GILD on January 14, 2010.  At the time, the fundamentals seemed to be supported by the technicals and warranted due diligence and possible acquisition.  Below is our revised assessment of Gilead based on the technical attributes which is precipitated by investor reaction to the company fundamentals.

Continue reading

Review of 2015 Assessment of LL & SAM

On February 25, 2015, we posted Edson Gould’s Speed Resistance Lines [SRL] for Lumber Liquidator (LL) and Boston Beer Company (SAM).  Starting with LL, 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.”

Since February 2015, LL has declined to the current level of $15.64.  While we might know the exact reasons why LL fell to the current level, we don’t know what to make of the dramatic decline other than the fact that the SRL gave every indication that this was possible.  Below is the updated SRL on Lumber Liquidator.

image

Upon further reflection, we examined the price of Lumber Liquidator and attempted to propose an alternative view on the stock price decline.  On March 3, 2015, we proposed the following thesis:

“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.”

Continue reading

Technically Speaking: Teva Pharmaceutical

On April 5, 2011, we said the following of the downside targets for Teva Pharmaceutical (TEVA):

“Charles H. Dow indicated that the fair value of a stock is the average price that is paid by investors. The fair value is the point at which an investor, as opposed to speculators, will consider buying or selling a stock. The fair value that we’ve arrived is based on the low of July 2006. If Teva were to decline below $47.06, the prospects for $29.77 become almost inevitable.”

Since that article, as TEVA declined below the $47.06 level, the stock eventually declined to the the ascending $29.77 level by November 2013 as seen in the chart below.  After hitting the ascending $29.77 level, the price jumped to just north of $72.

image

We’ll have to accept that this is all mere coincidence and slight of hand rather than any kind of basis in facts.  However, our claim has always been, if the target is achieved then review & decide whether to invest or if it is never achieved then move on to other opportunities.

Let’s review the prospects for TEVA under the current price structure which includes the periods since the November 2013 low to the present.  But first, you need to see the July 12, 2013 Speed Resistance Lines that we posted for TEVA as it is instructive and in alignment with the Dow Theory targets.

The long-term downside targets for TEVA based on the SRL indicated that the $32.50 level was the time to consider acquisition of the stock.  At that time we said the following:

“We could not determine a conservative downside target.  Because of this, we had to run some calculations and came up with the trendline of $43.33 and $32.50 as tentative support levels.”

Since TEVA provided the best indications using Dow Theory and came close using Edson Gould’s Speed Resistance Lines, we’re going to give the Dow Theory perspective in the long and short run and see where it takes us.

image

The above chart indicates that at the current price Teva Pharmaceutical is considered below fair value ($38.23) as long as the fundamental data confirms what the price suggests.  Additionally, TEVA seems poised to achieve the downside target of the ascending $26.86 level (approx. $28.50).  Purchases of this stock are best made in stages with 50% of allotted funds at the current price and 25%+25% at predefined lower levels.

Clean Harbors: Coincidence Confirmed, Again

On February 9, 2012, we posted Edson Gould’s Speed Resistance Lines [SRL] regarding Clean Harbors (CLH).  Our hope at the time was that our prior work on the top of Gould’s work would be handily refuted or confirmed.  At the time we posed the following SRL:

For us, our expectation was that the Clean Harbors would, at minimum, descend to the conservative downside target of $43.53.  Well, the timing and coincidence were in our favor as CLH fell –40% to the appointed levels that we thought the stock should descend.

As with all Speed Resistance Lines, there is a chance that the stock will continue to move higher.  However, at each point higher we readjust the SRL and arrive at new downside target.  In the case of CLH, the stock increased from the $67.60 price to as high as $70.30 thereby requiring an adjustment of the downside targets higher as well.  Remember, if the stock does not hit downside targets avoid it.  When and if the stock falls to the target, review for potential investment.

Finally, for no explicable reason, when all seemed in favor of the stock, CLH declined from the $70.30 peak to the low of $37.09 achieved in January 2016.  By achieving such an improbable low (improbable to those who were buying CLH in February 2012) CLH stock price appeared to be worth considering.  For this reason, we iterated a review of CLH for investment consideration on December 14, 2015. Since our mid-December 2015 review, CLH has increased by +39%.

image

At this point, we’d consider our general analysis of CLH a success from the December 2015 posting.  What do we see going forward?  We see two critical upside resistance levels to watch for.  The first upside resistance is at $59.00 and the second upside resistance level is at $69.00.  Obtaining a +39% gaining in a 1-year period might suggest that an investor consider selling all of their CLH holdings and reinvesting the funds somewhere else.

The Cold Hard Truth

Granted, luck and timing have a lot to say in any and all the work that we produce, however, that does not mean that our efforts on the topic should be dismissed as there may be some value in what we’re trying to accomplish.  Since the very first of our SRLs we’ve had more than 80% of the SRL downside targets achieved at the point of the initial examination.  This generally could could be considered a success.  However, of the 20% that have not been successful are positions that we’ve taken a real world investment in, which totally sucks.

In spite of the prevailing reality we continue to attempt to mitigate the available information with the stocks of interest to us.  We’ll narrow down this situation to a point where the SRL will work and/or we’ll still be able to benefit regardless of whether an immediate rebound is experienced.

Nasdaq Biotechnology ETF

The iShares Nasdaq Biotechnology ETF (IBB) is trading in range that ultimately needs to be resolved.  The outcome is either falling dramatically below $240 or striking the $343 level before doing a retest of the prior high around $400.

image

Already, IBB has managed to resist falling below the ascending $218.37 level.  This is in defiance of our belief that a highly volatile sector and fund should retest the extreme downside target of $133.60.  Those wanting to have exposure to the biotech sector but unwilling to take on the individual risk should consider the prospects of this ETF.