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 April 30, 2015, we presented downside targets for LinkedIn Corp. (LNKD) when the stock was trading at $199. In our concluding commentary we said the following:
“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.”
Between the closing price of $192 on February 4, 2016 and the opening of February 5, 2016, LinkedIn Corp. had declined nearly –30% in after-hours trading. The opening price on February 5th was at $125. Below is an updated price chart applying Edson Gould’s Speed Resistance Lines.
As indicated nearly one year ago, at nearly double the price, the extreme downside target of $92.06 was a distinct possibility. Additionally, anyone willing to take the risk at $139 or below has had favorable prices from which to choose. What should be noticed is the fact that LNKD managed to hit the extreme downside target and then bounce above it, for the time being.
There is incredible pressure for this company to be turned around or absorbed. It is with luck that the stock has managed to bounce at the level we outlined. However, further marginal failures by the company could result in a retest of the $59.07 price.
According to Yahoo!Finance, Ecolab Inc. (ECL), “…provides water, hygiene, and energy technologies and services for customers worldwide. The company operates in three segments: Global Industrial, Global Institutional, and Global Energy. The Global Industrial segment provides water treatment and process applications, and cleaning and sanitizing solutions primarily to large industrial customers within the manufacturing, food and beverage processing, chemical, mining and primary metals, power generation, pulp and paper, and commercial laundry industries.”
Since the bottom that occurred in the stock market in March 2009, Ecolab Inc. has outpaced the recovery in the Dow Jones Industrial Average by +94% and the S&P 500 by +66%. At some point the pendulum needs to swing in the opposite direction. It is our goal to point out the potential scenarios that are most plausible for the reaction that is to come for ECL. First, we’ll cover some important fundamentals and what they indicate and then we’ll cover the topic of technical aspects of downside risk.