Jacobs Engineering (JEC) - Get Report premarket Monday reported better-than-expected fiscal-fourth-quarter earnings, sending the stock as high as $95.66 at the open, shy of its monthly risky level at $95.74.
The stock then reversed direction and traded as low as $91.71, above its quarterly value level at $89.76.
My call is to countertrade the stock: Buy weakness to $89.76 and sell strength to $95.74.
The stock is struggling technically because it suffered a daily downside key reversal on Nov. 7. A key reversal is confirmed when a stock sets a new high, then closes below the prior day's low.
JEC traded as high as $98.08 on Nov. 7, then closed that day at $95.71, below the Nov. 6 low of $96.32.
Analysts' expected the company to earn $1.32 a share, and it beat that by earning $1.48. Revenue came in at $3.4 billion, above the estimate of $3.22 billion.
The company is in transition to a global technology solutions firm from an engineering and construction company. Effective Dec. 10 the company will be called Jacobs Solutions and will trade under the symbol J.
The stock is fundamentally neutral with a p/e multiple of just under 20 and a dividend yield of 0.73%, according to Macrotrends. If Congress ever gets around to implementing infrastructure spending, Jacobs Solutions would benefit.
The stock ended last week at $93.38, up 60% year to date and in bull-market territory 69% above its Nov. 26, 2018, low of $55.57.
Jacobs set a multiyear intraday high of $98.08 on Nov. 7 and now is 4.8% lower. Jacobs has not fully recovered from its crash of 2008.
The stock set its all-time intraday high of $95.61 in January 2008 and declined 73% to its November 2008 low of $26.
The Daily Chart for Jacobs
Courtesy of Refinitiv XENITH
The daily chart for Jacobs shows that the stock has been above a golden cross since March 26, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead.
The Dec. 31 close of $58.45 was an important input to my proprietary analytics, and its annual value level remains at $59.19 as a buy level crossed on Jan. 7.
The close of $84.39 on June 28 was another important input to my analytics. This resulted in its semiannual pivot at $83.79.
The close of $91.50 on Sept. 30 was an input to my analytics, and the quarterly pivot is $89.76. The close of $91.58 on Oct. 31 was another input and its monthly pivot is $95.74.
The 50-day and 200-day simple moving averages are now $92.79 and $82.91, respectively.
The Weekly Chart for Jacobs
Courtesy of Refinitiv XENITH
The weekly chart for Jacobs is neutral, with the stock above its five-week modified moving average of $93.27. The stock is well above its 200-week simple moving average, or reversion to the mean, at $63.32.
The 12x3x3 weekly slow stochastic is projected to slip to 77.41 this week from 82.08 on Nov. 22. A weekly close below $83.27 will downgrade the weekly chart to negative.
Trading Strategy: Buy weakness to its quarterly and semiannual pivots at $89.76 and $83.79, respectively, and reduce holdings on strength to its monthly pivot at $95.74.
How to use my value levels and risky levels:
Value levels and risky levels are based on the past nine monthly, quarterly, semiannual and annual closes. The first set of levels was based on the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sep. 30 established the level for the fourth quarter.
The close on Oct. 31 established the monthly level for November.
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.