On January 14, 2013, we did a technical review of Carbo Ceramics (NYSE:CRR) when it was selling at $79.64 (found here). At the time, we gave our assessment of the downside risk for Carbo Ceramics with the following comments:
"Carbo Ceramics would have to fall to $70.20 in order to be considered a buy using the Altimeter above. However, as has been the case in the past, seldom does the Altimeter decline to the buy level and then immediately reverse to the upside. therefore we'd expect a push below the $70.20 level for good measure. Edson Gould's Speed Resistance Lines have $65 as the downside support level."
On July 1, 2013, Carbo Ceramics (CRR) had a closing price of $65.41. This was within 1% of the expected downside target. However, on June 24, 2013, CRR fell as low as $62.11 on an intra-day basis and closed at $65.99. The intra-day low of $62.11 was fairly close to the Dow Theory downside target of $61.34, within 2% of the estimated target.
Finally, we offered up our take on the upside prospects with the following commentary from our January 14, 2013 posting:
"According to Value Line Investment Survey, the fair value for CRR is 14 times 2012 cash flow of $6.50, or a stock price of $91, a gain of +14% above the current price of $79.64. As an alternative, if the estimates by Value Line are correct, the 2013 fair value figure is $100.10, a potential gain of +25.69%."
On September 16, 2013, Carbo Ceramics (CRR) achieved a price of $101 per share. This meets the fair value target set by Value Line Investment Survey and hits the resistance level of the ascending $86.59 line on Edson Gould's Speed Resistance Lines [SRL].
It would be luck if Carbo Ceramics manages to exceed the current fair value level by a substantial margin. We see a move to $109 as the next upside target. However, keep in mind that when purchasing a stock well below fair value, the only expectation is that the stock may only go to fair value and should decline shortly thereafter. Our tentative upside target is $109.00 and our downside target is $68.00, as noted in the SRL above.
We will continue to hold our risk-free shares of CRR as they were acquired substantially below the current price as part of our long-term compounding/diversification strategy.
Disclosure: I am long CRR.