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As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
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  • Bitcoin Downside Targets

    It seems that Bitcoin has experienced a temporary peak in the price. No better time to assess what the downside targets might be for a price that has had a parabolic increase. In the last assessment of downside targets done on April 10, 2013 (found here) when Bitcoin was at $237.56, we said the following:

    "Because the nature of parabolic peaks is to crash disastrously explains why the more moderate peaks of January 2012 and July 2012 did not give up more than 66% of the previous increase. The current parabolic increase in Bitcoin has a conservative downside target of $89.45 and an extreme downside target of $76.05."

    After our April 2013 downside projection, Bitcoin fell as low as $68 depending on the source as indicated in our June 26, 2013 review (found here). However, regardless of the source, Bitcoin declined below the extreme downside target of $76.05.

    (click to enlarge)

    Our conservative downside target for Bitcoin, based on the peak closing price of $785.50 is $384.83. The extreme downside target is $261.83. The worst case scenario is for Bitcoin to fall as low as $152.83 as indicated by the red line on the chart.

    As we've written many pieces on the topic of Edson Gould's Speed Resistance Line, we've made some observations that we think should be highlighted at this time. For the first time, we're going to provide what we believe might be an upside target. In the case of Bitcoin, the next conservative upside target is $1,154.49 if the most recent peak of $785.50 is exceeded. This is a tentative estimate based on observations of the many successful downside SRLs that we have run in the past. We'll be on the lookout for what may come next.

    Tags: Bitcoin
    Nov 20 12:12 AM | Link | 17 Comments
  • Dow Theory On Marvell Buyout Rumors

    On November 5, 2013, the price of Marvell Technology (MRVL) increased +8.49% after news of KKR & Co. (KKR) having acquired 5% of the chipmaker. According to Bloomberg News:

    "KKR & Co. has acquired almost 5 percent of computer chipmaker Marvell Technology Group Ltd. , two people with knowledge of the matter said.

    KKR sees the Hamilton, Bermuda-based company as undervalued and has discussed its holding with the company's co-founders, Chief Executive Officer Sehat Sutardja and his brother Pantas, said one person, who asked not to be identified as the information is private. One scenario New York-based KKR is considering is a leveraged buyout of Marvell, though no such deal is imminent, the person said (source link)."

    On our Nasdaq 100 watchlist dated June 20, 2012, we had the following to say about Marvell Technology (found here):

    "Dow Theory suggests that the following are the downside targets for Marvell:

    • $10.61
    • $7.54
    • $4.47

    So far, Marvell has fallen within 6% of the $10.61 target, however, it has not breached that point thus far. We'd be buyers of the stock at $8.25 with little regard for downside risk at that point in time."

    Since June 20, 2012, Marvell has had the following price performance:

    (click to enlarge)

    If measured by the very first day that Marvell fell below $8.25, the stock has increased +66.18% in just over one year ($7.57-$13.03). However, if Marvell were measured based on the price before the announcement of KKR's interest in the stock, the increase in Marvell has been +45.57%.

    From our perspective, considering Marvell undervalued after a +45% run up in the price is a stretch. However, we suspect that KKR will try to squeeze out as much of this stock as possible. Charles H. Dow, co-founder of the Wall Street Journal, has the following to say on this particular topic:

    "It is a matter of comparative indifference with a large operator whether the stock which he is handling is a point or two higher or lower. The thing which is important is whether the public follows up the advances so that he can sell (Dow, Charles H. Review and Outlook. Wall Street Journal. June 29, 1899.)"

    In this case, the large operator is KKR & Co. The goal of KKR is to see that Marvell rises as much as possible after they have taken a sizable position. One method to do this is to announce, through major channels of communication with unnamed sources, that they have taken a sizable position.

    What should happen next is continued speculation of whether or not Marvell is acquired by a competitor or another private equity firm, ultimately pushing the stock price higher. Unfortunately, those relying on such information may be caught holding the bag if the rumors are proven to be just that.

    It is Dow Theory that has pointed us in the direction of when to look to acquire or accumulate stocks and it is also Dow's theory that suggests when to be cautious and possibly sell. For now, Dow Theory indicates that the fair value of Marvell is $14.58. Exceeding the fair value target offers up significant opportunity. Remember, a large operator like KKR isn't aiming for a "point or two higher." If the rumors are true, then KKR probably has their sights set on $22 or above. However, any price above $14.58 should be considered speculation, at best.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: KKR, MRVL
    Nov 06 2:59 PM | Link | Comment!
  • Sell In May? No Way!

    On March 29, 2013, we published a review of the one-year performance of our March Dividend Watch Lists for the prior 3 years to see if the old adage of "Sell in May and Go Away" had any merit. Our conclusion was as follows:

    "Even with the view of 'Sell in May and Go Away,' the top five stocks on our U.S. Dividend Watch List have performed quite well. The average gain over the three periods [2010, 2011 & 2012] reviewed was +15.72% compared to average gain of the Dow Industrials at +10.20%."

    In closing our piece on the topic of the one year performance of our U.S. Dividend Watch List, we said the following:

    "…we recommend considering the top five stocks from our latest dividend watch list for potential investment, even if the mantra is 'Sell in May.'"

    The latest watch list was our March 22, 2013 posting [found here] and had the following companies and the subsequent performance:

    (click to enlarge)

    It is not every day that you could expect dividend increasing stocks to perform better than the leading high tech stock index in the form of the Nasdaq 100 (NDX). However, that is exactly what happened with 61% of the listed stocks. In addition, 72% of the stocks listed managed to exceed our preferred benchmark, the Dow Jones Industrial Average.

    Among the three stocks of particular interest to us [(CATO), (FDS), (MYE)], Myers Industries has been the top performer with a gain of +42% in the last six months. The average gain for the entire watch list was +16.47% as compared to the Nasdaq 100 index gain of +14.63%. The average gain for the top five stocks on our watch list [(CATO), (FDS), (CTWS), (EXPD) & (BCR)] was +17.06%.

    Is the six month period since our March 22, 2013 watch list a meaningful measure of performance? For investors with an understanding of Charles H. Dow's goal of "seeking fair profits" [more here], within a tax-deferred or tax-free retirement account, it is everything. Gains of +10% or more in a six month period require careful consideration of selling the principal. Additionally, gains in stocks that have exceeded the performance of the Nasdaq 100 (NDX) index in the same period of time should be sold (principal only for the purposes of compounding) as exceptional gains of this kind are proven not to be sustainable over extended periods of time.

    The concept of selling in May could be correct, for those seeking average performance of their portfolio. However, since 2010, our late March U.S. Dividend Watch Lists have provided above average returns one year later. Because it is our nature to take these gains with a grain of salt, we're expecting that the one-year performance has to be far less than the six-month above average performance so far. We will reassess the actual one-year performance to see if, in fact, the March 22, 2013 list can retain such a "wide" margin of performance against the Dow Jones Industrial Average.

    Disclosure: I am long CATO, FDS, CTWS, EXPD, BCR, DBD.

    Tags: CATO, FDS, CTWS, EXPD, BCR, NWN, MSFT, SBSI, MYE, JW.A, AROW, DBD, SYBT, FRS, SO, WEYS, TDS, ED
    Sep 25 3:10 PM | Link | Comment!
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