Here's Why You Should Be Careful of Harley Davidson Takeover Speculation

It's not an ideal time to buy Harley Davidson stock, according to technical analysis, no matter what the deal rumors say.
By Ken Goldberg ,

While it's fun to be caught up in a stock that is being taken over, most often the rumors of takeovers are the constructs of leveraged speculators that need a price bump to exit. It's possible this is the case with Harley Davidson (HOG) - Get Report , which is now the subject of such rumors

Click here to see the chart in a new window

If we step away from the rumors, a conclusion can be sought based upon objective data from the market itself, which is the manifestation of the crowd's mood toward a particular index, or stock. In this case, this monthly bar chart of HOG shows that the rise off of January's low near 36 has become choppy and overlapping; the telltale footprint of a corrective structure. This informs those that were astute enough to buy then that the zone between 52 and 58 should be considered as the zone to offload some long exposure into. Why? The 52 level is where the rise from these June lows will be a Fibonacci 62% of the rise out of the January low to the April peak. If this initial resistance is strongly exceeded, 58 is where there will be two equal rising sequences off the January low; the next most common Fibonacci measurement. 

---

In addition, while this monthly chart shows prices rising into the 20-month (pink line) and 2 standard deviation band (olive/gold line), containing 95% of normality, the daily bar chart (not shown here) highlights that the 58 level would test the 3 standard deviation band, which contains 99.7% of normality. This suggests that unless a takeover arrives soon, 55 +/-3 is a statistically significant resistance zone, where the probability of price action above it is measured in fractions of 1% of normality; aka rare!

That said, there is room for price to rise into the higher end of this zone, as the daily stochastics (also not shown) are rising with the weekly and monthly. However, as the first pink oval, now being probed, illustrates, higher prices are not required to end at least the initial rise off the lows of this year. There are better objective buy zones expected in the near future, as our decision support engine (DSE) is warning members of our Trading Room and Alerts services as of today. Ideally, as the blue arrow anticipates, 43 +/-2 is where an intervening correction should next support any decline in prices. Then, like the first pink oval now warns, a stronger red oval will warn those willing to listen that the 59 +/-1 zone is an even more important exit. Or, at least a place to use protection to lock in gains and avoid profits becoming losses. 

---

These are the kinds of analyses we will be focusing on in our July workshop in Los Angeles, where there are still a few seats available. If you would like to reserve your spot, contact information is available at that link.

Interested in this kind of market analysis? Sign up today for a FREE 10-day trial of our LIVE TRADER with DSE ALERTS service at no obligation. Inquire about special pricing for TheStreet readers after your complimentary trial.

No position!

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Loading ...