How to Trade Lowe’s Stock as It Plans NFL Draft Ads

Buy Lowe’s on weakness to $92.56. Reduce holdings on strength to the 200-day SMA at $108.50. Lowe's ads will appear in tonight's draft but before then.
Author:
Publish date:

Lowe’s Cos.  (LOW) - Get Report will be offering a bolder marketing strategy as it advertises during the NFL draft this evening. 

The stock is rising with the market but is below its 50-day simple moving average at $97.41. And it has been below a death cross since March 25.

But its weekly chart will be positive if the shares close on Friday above $96.30, which is its five-week modified moving average. 

If the Mooresville, N.C., home improvement retailing giant dazzles investors given the new ads, the stock can rally to its 200-day simple moving average at $108.50.

Lowe’s will be showing three new ads during the programming of the NFL draft this evening. For details read this story as it appeared on CNBC on April 22.

At $96.17, the stock is down 20% year to date and in bear-market territory 24% below its 52-week high of $126.73 set on Feb. 20. 

On the flipside, the stock is in bull-market territory 61% above its March 19 low of $60.

The stock is reasonably priced with a p/e multiple of 16.2 with a dividend yield of 2.38%, according to Macrotrends.

The company has beaten earnings-per-share estimates in the past three quarters, but the stock slumped on its latest report released on Feb. 25.

The Daily Chart for Lowe’s

The Daily Chart for Lowe's

The Daily Chart for Lowe's

Courtesy of Refinitiv XENITH

The daily chart for Lowe’s shows the steep decline of 53% from its Feb. 20 high of $126.73 to its low of $60 set on March 19.

At the high the stock was below its annual risky level at $135.32.

The stock fell below its 50-day simple moving average on Feb. 25. Then it fell below its semiannual pivot at $112.65 on Feb. 27.

The stock then fell below its 200-day simple moving average on March 5. This resulted in a cascading decline to its March 19 low of $60.

The rebound to $99.82 on April 14 was below the 50-day SMA.

A death cross that formed on March 25 was confirmed when the 50-day SMA declined below its 200-day SMA. 

This happened after the stock had bottomed, so it became a signal to sell strength to these moving averages.

The stock is well below its semiannual, monthly and quarterly risky levels at $112.65, $113.21 and $115.57, respectively.

The Weekly Chart for Lowe’s

The Weekly Chart for Lowe's

The Weekly Chart for Lowe's

Courtesy of Refinitiv XENITH

The weekly chart for Lowe’s will be positive if the stock ends this week above its five-week modified moving average at $96.12. 

The stock is above its 200-week simple moving average, or reversion to the mean, at $92.56. This key average has been a magnet since the week of March 13.

The 12x3x3 weekly slow stochastic reading is projected to rise to 43.91 this week from 38.86 on April 17.

Trading Strategy: Buy Lowe’s on weakness to the reversion to the mean at $92.56. Reduce holdings on strength to the 200-day SMA at $108.50.

How to use my value levels and risky levels:

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

Second-quarter 2020 and monthly levels for April were established based on the March 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.

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 past 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.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

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