Samsara: Robust Top-Line Growth Shows Us A Potentially Bullish Scenario

Summary

• Lyn Alden's research on Samsara highlights continued top-line growth via expanding revenue.
• Our methodology provides us with a probabilistic viewpoint on market movements, utilizing repeating fractal structures to identify higher probability setups.
• Fibonacci mathematical relationships in nature and decision-making can provide guidance for these types of setups such as in IOT and many others.
• Looking for a helping hand in the market? Members of Stock Waves get exclusive ideas and guidance to navigate any climate. Learn More »

Hiroshi Watanabe

By Levi at Elliott Wave Trader; Produced with Avi Gilburt

Samsara (NYSE:IOT) is likely one of those IYKYK (if you know, you know) companies out there. It could be that you have never heard of it before. However, that does not mean that you have not seen it in use. From Samsara.com:

Samsara.com

With this type of market share, what might come next for the company? We asked Lyn Alden that very question. Here's a brief synopsis of her initial research into IOT:

"IOT is a leading internet of things company, with a large presence in the transportation and logistics industries. The company has become free cash flow positive here in 2024, however their free cash flow is still very low. The stock instead still trades mainly on top-line growth, which remains robust.

YCharts

At 22x sales, investors are quite bullish on the company, leaving little margin of safety for the stock to have good performance ahead. Investors should only consider Samsara from a fundamental perspective if they are quite bullish on its structural growth prospects." - Lyn Alden

Without profitability at the moment, how might we project probabilities onto the stock price as displayed on the chart? We want to share what, for you, the reader, may be a new manner of viewing the markets.

Looking At Markets Via A Probabilistic Viewpoint

We want everyone reading these articles to understand that markets are fluid, dynamic, non-linear systems. In order to trade such systems, one has to develop the experience necessary to navigate its complexities.

So, how do we turn what appears to be random into an advantage? Elliott Wave has as its foundation the repeating fractal nature of financial markets. This means that there are structures that continue to form on all time frames, and it's the repetition of them that gives us an edge.

What's this framework of this structure? Please allow me to share an excerpt from the article: "This Analysis Will Change The Way You Invest Forever - Part 3" which you can read in its entirety here. It's part three of a six-part series published by Avi Gilburt here on Seeking Alpha. It's well worth your time to read the series.

The article discusses what "Phi" is and how it is ever more present in our lives than we may be aware.

"Further examples include the fact that the navel in the human body divides the average adult body into Phi-based proportions, the neck divides the distance from the naval to the head into a Phi-based proportion, the heart muscles in the left ventricle are made up of a series of spirals that repeatedly contract to a point that is approximately .618 of the long axes from the aortic valve to the apex, and so on.

In fact, Leonardo Da Vinci depicted the general external Fibonacci relationships within the body of man in one of his most popular drawings entitled Vitruvian Man."

What does a 500-year-old sketch have to do with the stock market?

Here's one more excerpt from that article:

"There is significant evidence that behavior and decision making within a herd and on an individual basis displays mathematically driven distributions based on Phi.

This basically means that mass decision making will move forward and move backward based upon mathematical relationships within their movements. This is the same mathematical basis with which nature is governed. The same laws that were set in place for nature also govern man's decision making en masse, and on an individual basis." - Avi Gilburt

Let Leonardo Provide Guidance

Not Da Vinci, though. This is Leonardo Pisano Bigollo, or more commonly known as Leonardo Fibonacci. If you would like to read more about this history and work, please review the above-referenced article.

Now, The Practical Application Of The Theory

Theories are all well and good. But how do I use this tool to provide guidance regarding my investment and trading decisions? Can it give me a potential edge regarding higher probability setups and scenarios?

We regularly share such types of setups with our members via the Wave Setups feature. At any moment in time there are 40-50 active setups with both bullish and bearish scenarios. Here's a recent post for IOT from August 2nd:

StockWaves - Wave Setups - Elliott Wave Trader

Note the specific levels of support, resistance, and invalidation of the setup. Once the price further fills out the chart and either comes toward an important point of support or resistance, we will update the table with new levels. Note such an update from August 14th:

StockWaves - Wave Setups - Elliott Wave Trader

So, now going forward, what is most likely from what we can tell?

Chart by Garrett Patten - StockWaves

As you can see from Garrett's latest post a few days ago, he anticipates that the price will now make a small corrective retrace in a wave [ii]. This should hold the $35 - $38 area. The current setup would invalidate with a move under $33.92. But the risk vs. reward here looks favorable, as potential upside targets are next in the $60+ zone or higher.

Here's The Key Takeaway For IOT

We anticipate support to hold at the $35 - $38 zone. Watch carefully how the next pullback unfolds. If Samsara is to realize its longer-term potential, then we should see a move down in the near term, which could provide an attractive entry point. Or, the price may break out directly from these current levels. In either case, risk would be down to near the recent lows at the $33.92 invalidation level for this current scenario.

Some Important Things To Remember

I would like to take this opportunity to remind you that we provide our perspective by ranking probabilistic market movements based upon the structure of the market price action. If we maintain a certain primary perspective as to how the market will move next, and the market breaks that pattern, it clearly tells us that we were wrong in our initial assessment. But here's the most important part of the analysis: We also provide you with an alternative perspective at the same time we provide you with our primary expectation, and let you know when to adopt that alternative perspective before it happens.

There are many ways to analyze and track stocks and the market they form. Some are more consistent than others. For us, this method has proved the most reliable and keeps us on the right side of the trade much more often than not. Nothing is perfect in this world, but for those looking to open their eyes to a new universe of trading and investing, why not consider studying this further? It may just be one of the most illuminating projects you undertake.

(Housekeeping Matters)

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in IOT over 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.