Whirlpool (WHR - Get Report) reports second-quarter results after the close on Monday, July 22 with the stock approaching its risky level for July at $152.20 and its "reversion to the mean" at $157.16. This consumer durables company makes home appliances, including refrigerators and washing machines sold around the world under several brand names including Maytag and KitchenAid.
Whirlpool closed the first half of 2019 at $142.36 on June 28, which became a key input to my proprietary analytics. Left over from the first half of the year is the annual risky level well above the market at $180.24. The value level for the second half of 2019 is $136.59. The risky level for July is $152.20. The third-quarter value level is well below the market at $96.30.
The daily chart shows a "golden cross" and the weekly chart has been positive since the week of June 14 when the stock closed at $135.68.
Fundamentally, Whirlpool is relatively cheap with a P/E ratio of 9.56 and a favorable dividend yield of 3.22%, according to Macrotrends.
Analysts expect Whirlpool to report earnings of $3.78 when it reports earnings after the closing bell on Monday, July 22, and the company beat estimates for the last three quarters. Global demand for household appliances could suffer by the slowing worldwide economies and weak currencies vs. the dollar. The question is the status of the U.S. economy.
The Daily Chart for Whirlpool
Courtesy of Refinitiv XENITH
The daily chart for Whirlpool shows the formation of a "golden cross" on March 7 when the 50-day simple moving average rose above the 200-day simple moving average indicating that higher prices lie ahead. When the stock traded to its Dec. 26 low of $99.40 and closed that day at $106.01, a positive "key reversal" occurred as this close was above its Dec. 24 high of $104.85. The close of $142.36 on June 28 was input to my proprietary analytics. The second half value level is $136.59 with the risky level for July at $152.20. The third-quarter value level is below the chart at $96.30 and above the chart is the annual risky level at $180.24. The 50-day and 200-day simple moving averages are $135.46 and $127.88, respectively.
The Weekly Chart for Whirlpool
Courtesy of Refinitiv XENITH
The weekly chart for Whirlpool is positive but overbought with the stock above its five-week modified moving average of $140.98. The stock is below its 200-week simple moving average or "reversion to the mean" at $157.16. The 12x3x3 weekly slow stochastic reading is projected to end the week at 82.50 above the overbought threshold of 80.00. When you look back to its October low of $102.13 this reading was 4.85 well below the 10.00 threshold as a stock "too cheap to ignore."
Trading Strategy: Buy weakness to the semiannual value level at $136.59 and reduce holdings on strength to the monthly risky level at $152.20 and to the 200-week SMA at $157.16.
How to Use Value Levels and Risky Levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on June 28. The quarterly level was changed at the end of June. 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.
How to Use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."