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Category Archives: 50% principle
Canadian Watch List: BCE Inc.
Posted in 50% principle, BCE.TO, Canada, Canadian Dividend Watch List, Dow Theory
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1972-1975: Dow’s 50% Principle #DowsTheory
Below is a great charting of Dow’s 50% Principle from the work of Richard Russell. Continue reading
Posted in 50% principle, bear market, bear market rally targets, Dow Theory
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Russell 2000 Downside Targets & 50% Principle
Below are the downside targets for the Russell 2000 Index applying Dow’s Theory. Continue reading
Advance Auto Parts: Price Targets
According to Yahoo!Quotes, Advance Auto Parts (AAP) “… provides automotive replacement parts, batteries, accessories, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks.”
Below are the downside support targets based on the high of $199.38 and the upside resistance targets based on the $79.26 low.
Posted in 50% principle, AAP, Edson Gould, Speed Resistance Lines, SRL
Interest Rate Monitor: September 2018
In this posting, we’ll continue on a theme that we’ve outlined since December 16, 2015, when we said:
“A single rate increase by the Federal Reserve in no way makes for a trend. However, markets often lead the way and what initially seems ‘bizarre’ is only a natural change in regime, a change that we haven’t seen since the early 1940’s.”
The change “…that we haven’t seen since the 1940’s” is the secular trend in interest rates to go from an extremely low level to the opposite end of the spectrum, potentially to high double digit levels. Our September 4,2014 posting suggested that:
“Investors anticipating a general rise in interest rates should feel some comfort in knowing that most manager in the utility sector are ready for what is to come. Rising interest rates are not an automatic death sentence for utility stock prices or earnings. In fact, the early stages of rising interest rates may see utility stocks match or exceed the returns of non-interest rate sensitive stocks, on a total return basis. Only when the outlook is cloudy will it become difficult to offer projections that are in line with prior expectations.”
We have been consistent in the belief that the secular trend in interest rates is higher instead of lower. With this in mind, we are presenting our upside targets (resistance levels) for the daily 3-month Treasury rates. We use the daily 3-month Treasury rates simply because it precedes all Federal Reserve rate increases and decreases since 1934 (100%).
Lam Research: Fighting Gravity
On September 27, 2017, we said the following of Lam Research (LRCX):
“Our view is that all parabolic moves are met with entropy. This should bring a breakdown in the stock price to at least the conservative downside target of $90.43. This isn’t a wish, it is based on the historical pattern in the price as previously indicated.”
Since September 2017, LRCX has increased from $177.12 to as high as $228.65, a change of +29%. However, as of August 10, 2018, LRCX sits at $178.10, a change of +1% from the September 2017 posting. Our belief is that the downside targets for LRCX are still in play based on the Speed Resistance Lines [SRL] that we propose. Below is the updated SRL along with a Dow Theory consideration of upside targets.
Bitcoin: April 2018
On February 17, 2018, we said of Bitcoin:
“…before a new high (substantially above the $19,343) is achieved, we expected a retest of the $6,914.26 level (or something close, like, $7,000-$7,200).”
We will continue to revisit the parts where we got the analysis right because this is where Dow Theory was correctly interpreted. Below is the charting of the February 5, 2018 low and the subsequent rise and the retest of the low on April 1, 2018.
Posted in 50% principle, Bitcoin, Dow Theory
Bitcoin Upside Targets
Like Ethereum, Bitcoin is rebounding nicely from the February 5, 2018 low. Below are the upside targets for Bitcoin:
Posted in 50% principle, Bitcoin, Dow Theory, ethereum
Ethereum Upside Targets
As Ethereum recovers from the low set at $695.08 on February 5, 2018, the expected upside targets are as follows:
Posted in 50% principle, Dow Theory, ethereum
Mercury General: Targets and Perspective
On August 14, 2012, when Mercury General (MCY) was trading at a price of $37.30, we said the following:
According to Morningstar.com, MCY is considered a “buy” at $31 and at fair value at $45. Our own model suggests that MCY is significantly undervalued at $39 and a “buy” at $45. Investment Quality Trends (www.iqtrends.com) indicates that when MCY is at a yield of 4.5% or higher, the stock should be considered for purchase. Currently, MCY has a dividend yield of approximately 6.60%. Keep in mind that we do not buy stocks for their dividend yield. Instead, we use the company’s consistently increasing dividend as the only proof that the company management can:
Since that time, we’ve seen Mercury General increase from $37.30 to as high as $64.52. Along with the increase in price, we’ve been forced to revise our perspective on the stock. Below, we will outline the revisions to our perspective and provide target prices we think MCY should be considered for acquisition.
Details of the Ideal Transaction
On January 12, 2016, we took a position in Helmerich & Payne (HP) at $47.41. At the time, HP was coming off of a high of $118.29.
According to Dow Theory, an investor should only expect one half of the previous move. With this in mind, we charted an upside target of approximately $79.16 as the likely point for selling the stock as outlined in our July 2, 2016 posting.
On January 13, 2017, we sold our holdings in HP at $78.31 for a gain of +74%. For reasons unknown, HP declined from $78.31 to $43.02 by September 1, 2017, a decline of –45%. An outline of the change from February 3, 2014 to January 12, 2018 is charted below.
The Rationale
Naturally, this is the most ideal transaction that we could engage in. Below we will lay out our observations on how we accomplished this task.
First and foremost, Helmerich & Payne is a high quality oil and gas driller that survived the crash that was experienced after the 1970’s. In our view, if a company can increase their dividend over many years and survive a period that put a lot of competitors out of business, then you’re dealing with a good management team. What follows are the details that we are looking at.
Posted in 50% principle, Dow Theory, Helmerich & Payne, HP, seeking fair profit
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