Analog Devices Nears Risky Levels After Setting All-Time High

Book profits on shares of Analog Devices on strength to its monthly and semiannual risky levels at $127.78 and $128.77, respectively.
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Analog Devices  (ADI) - Get Report beat earnings-per-share estimates but missed on revenue when it reported quarterly results on Wednesday.

The stock traded to an all-time intraday high of $127.30 on Wednesday. My call is to book profits on strength to its monthly and semiannual risky levels at $127.78 and $128.77, respectively.

The company raised its dividend and offered upbeat guidance on demand for semiconductors following a tough 2019. 

Analog Devices provides chip components for industrial, communications, automobile and consumer segments. The company made a reference to a potential drag due to the coronavirus.

Here's a link to the story on the company's earnings.

The stock traded to a new high of $127.30, up 7.1% year to date and in bull market territory up 59% from its cycle low of $80.08 set during the week of Dec. 28, 2018.

Before this rally, the stock had a bear market correction of 22.6% from a high of $103.59 set during the week of June 8, 2018.

The Daily Chart for ADI

Daily Chart For Analog Devices

Daily Chart For Analog Devices

Courtesy of MetaStock Xenith

The daily chart for ADI shows the bull market rally from the lower left to the upper right. The price action on Dec. 26, 2018 was a “key reversal” as the stock closed at $84.34 that day above the Dec. 24, 2018 high of $82.91.

Note that a “golden cross” formed on Feb. 27, 2019 when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. 

When this buy signal is on the chart the strategy is to buy weakness to the 200-day SMA and this opportunity occurred several times. The last opportunity came on Feb. 10 when the average was $112.04.

On Dec. 31, the stock closed at $118.84 which was the input to my proprietary analytics. Going into earnings the stock was positioned above its annual and quarterly pivots at $117.33 and $118.28, respectively. Its semiannual risky level is $128.77.

The close of $109.20 on Jan. 31 was an input to my analytics and the monthly risky level for February is $127.78. This week’s value level is $113.67.

The Weekly Chart for ADI

Weekly Chart For Analog Devices

Weekly Chart For Analog Devices

Courtesy of MetaStock Xenith

The weekly chart for ADI is positive with the stock above its five-week modified moving average of $117.32. 

The stock is well above its 200-week simple moving average or “reversion to the mean” at $89.45. The stock has been above this average since the week of Feb. 19, 2016 when it was $50.06.

The 12x3x3 weekly slow stochastic reading is projected to rise to 56.81 this week up from 54.60 on Feb. 14.

Trading Strategy: Buy weakness to its quarterly and annual pivots at $118.28 and $117.33, respectively, and reduce holdings on strength to monthly and semiannual risky levels at $127.78 and $128.77, respectively. 

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics. Quarterly, semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Monthly levels for February were established based upon the January 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.