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  • A Different Perspective On Lumber Liquidator

    On February 25, 2015, when Lumber Liquidator (NYSE:LL) was trading at $57.23, we said the following:

    "Those interested in LL and willing to perform appropriate due diligence could engage in a three phase purchase plan beginning below $39.81, $31.64 and $23.47. Investors, as opposed to speculators, should be willing to accept that there is no compensation for the wait when holding LL and that the decline to the ascending $23.47 level is a real risk."

    In fact, Lumber Liquidator blasted below the $39.81 support level and has rested at the $31.64 support level and started to move higher as seen in the chart below.

    (click to enlarge)

    We've intentionally left out the move up from $38.83 to highlight the extent of the decline and the high level of coincidence with the supports levels that we had outlined in the previous month. All that remains is the decline to the $23.47 level.

    While famous short-sellers have the ear of influential media to talk their book and ensure their profits, we only have price action to work from. For this reason, it is well worth noting another coincidence that relates to Lumber Liquidator and futures price on lumber as seen in the chart below.

    (click to enlarge)

    The coincidence of Lumber Liquidator (LL) declining significantly at the same time as the futures price of lumber (as traded on the Chicago Mercantile Exchange) seems difficult to ignore. Investors should take note of the fact that in three prior periods indicated in blue, LL has lost a minimum of -35% and as much as -53% when the price of lumber declined -33% or more.

    So far, from December 2013 to March 2015, the price of lumber has declined -23% while LL has declined as much as -67.49%. Much of the decline in LL has been exacerbated by concerns related to quality and sourcing of the flooring. However, the current decline is only slightly out of alignment from what has happened in the past.

    We say slightly because we're excluding the peak in lumber at 395.50 when LL was trading at $62.19. While lumber was trading lower and not to exceed the $395.50 (considered a bear market), LL gained another +92.05%. If Lumber Liquidator's decline was measured from the February 15, 2013 peak in lumber at $395.50, the decline in the stock price would equal -37.56%.

    Assuming we aren't on the cusp a new bear market overall, the decline in LL has been overdone and an individual willing to accept the downside risk to $23.47 should consider implementing a three phase purchase plan. An investor must keep in mind that the conservative upside target is $80.53 which is the new "limit" for the stock instead of the previous $119.44. In addition, the previous downside targets now act as upside resistance levels as was the case when LL could not sustain $53.68 prior to the recent collapse.

    Tags: LL
    Mar 03 6:35 PM | Link | 2 Comments
  • Technical Take: Lumber Liquidator & Boston Beer

    Below are the downside targets using Speed Resistance Lines [SRL] for Lumber Liquidator Holdings (NYSE:LL) and Boston Beer Company (NYSE:SAM) based on the work of Edson Gould.

    Lumber Liquidator (LL) has declined from the peak of $119.44. Gould's SRLs suggest that from the peak price, LL has a conservative downside target of $53.68 and an extreme downside target of $39.81.

    (click to enlarge)

    On February 25, 2015, LL was unable to sustain a price above the ascending $53.68 level with a decline of over -17%. Our best guess is that LL will decline to the ascending $39.81 level, which currently approximates $49.50 price. Those interested in LL and willing to perform appropriate due diligence could engage in a three phase purchase plan beginning below $39.81, $31.64 and $23.47. Investors, as opposed to speculators, should be willing to accept that there is no compensation for the wait when holding LL and that the decline to the ascending $23.47 level is a real risk.

    Boston Beer Company (SAM) is the brewer of Samuel Adams beer and a multitude of other "craft" beers. Today SAM declined -10% on an earnings miss. Below is the SRL for SAM.

    (click to enlarge)

    Our expectations for SAM are not very high as the last time that the stock was able to achieve the conservative downside target of $70.13 was in 2011. Since that time, SAM has faltered but not fallen. In spite of this fact, we've outlined the conservative downside target of $180.12 and the extreme downside target of $107.99. Investors should note that a decline to the ascending $180.12 level is an ideal buying target with a follow-up purchase below $141.25. As with Lumber Liquidators, SAM is bet on growth in the stock price and not much else.

    The relative strength of each company (long-term viability) is what makes these stocks compelling and worth considering at the appropriate predetermined price.

    Tags: LL, SAM
    Feb 25 1:57 PM | Link | Comment!
  • February 2014 Canadian Watch List Review

    Below is the performance of the nine stocks from the February 14, 2014 Canadian Dividend watch list compared to the Toronto Stock Exchange gain of +9.16%.

    SymbolName20142015% change
    TLM.TOTalisman Energy11.669.52-18.35%
    FCR.TOFirst Capital Realty17.3320.0715.81%
    FTS.TOFortis Inc.30.7139.5328.72%
    CWT-UN.TOCalloway REIT25.7730.4518.16%
    CAR-UN.TOCanadian Apartment Properties21.5226.9825.37%
    D-UN.TODundee REIT29.3127.26-6.99%
    BNS.TOThe Bank of Nova Scotia63.2967.46.49%
    CUF-UN.TOCominar REIT18.4519.656.50%
    LB.TOLaurentian Bank of Canada45.9650.49.66%

    The average gain for all of the stocks listed was +9.49%. The best performing stock was Fortis (FTS.TO) with a gain of +28.72%. Over the last year has made four dividend payments with a dividend increase of +6.25% with the latest payment on February 12, 2015. Bank of Nova Scotia (NYSE:BNS) gained +6.49% in the year. The worst performing stock was Talisman Energy (NYSE:TLM) with a decline of -18.35%.

    Analyst estimates for the listed stocks are compared to the actual performance in the chart below.

    (click to enlarge)

    Talisman Energy was projected to have the worst decline and it did. However, it could have been much worse as depicted in the chart below. At one point, Talisman Energy stock price declined as much as -63% before Spanish oil giant Repsol (REP.MC) announced on December 15, 2014 the intention to buy TLM.TO.

    (click to enlarge)

    Our commentary on the dire analyst expectations for Talisman Energy was:

    "As far as we can tell, TLM.TO is not slated to be worth very much by the end of 2014. We'll have to see how this picture plays out. However, if the stock market can keep its head above water for the next 10 months we wouldn't be surprised to see TLM.TO to pull off a shocker."

    In the midst of a collapsing oil and stock prices, Talisman did pull off a shocker and just before the end of 2014.

    Tags: BNS, TLM
    Feb 17 3:05 PM | Link | Comment!
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