Harley-Davidson Inc. (HOG) just added a new bike to its testosterone inducing catalog, with the urban-focused Street Rod boasting impressive power for a middleweight cycle. The bike has been engineered for precise handling in city traffic but weekend warriors and country tourists are just as likely to enjoy the ride. Ironically, European feedback inspired the design, with cycles on the other side of the Atlantic comprising a larger share of the commuter population.

The stock has raced through its fair share of ups and downs in the last two decades, first plunging to a 12-year low in 2009 and then entering a powerful recovery wave that stalled in 2014, just two points under the 2006 all-time high. It’s been shaking off a 2015 35-point decline for the last 13-months and could finally be setting up for a critical test at long-term resistance.

HOG Long-Term Chart (1994 -2017)

HOG

The stock entered a powerful uptrend after losing two-thirds of its value during the 1987 crash, gaining ground at a steady pace while splitting five times into September 2000 when momentum fizzled out just above $50. It then entered a broad sideways pattern, running in place while the majority of the stock universe sold off during the Dot-com bear market. It posted nominally higher highs at $54 and $57 during this period while declines found support in the low-30s.

The shallow highs generated a mid-decade rising channel that contained the upside into the 2006 all-time high at $75.87. A pullback into October 2007 reached channel support, ahead of a 2008 breakdown that accelerated to lower ground during the economic collapse. Selling pressure finally eased in March 2009 at a 12-year low in single digits, ahead of a bounce that completed a V-shaped retracement within a few points of the prior high in May 2014 (blue line).

A reversal off the 2014 top found support in the low-50s, ahead of a lower high that completed the next leg of a double top pattern, ahead of an October 2015 breakdown. The stock then plunged more than 20-points in just three months, coming to rest in January 2016 at a 4-year low that aligned tightly with the 50% rally retracement and 200-month EMA support near $40.

HOG Short-Term Chart (2014–2017)

HOG

The 2016 bounce unfolded in multiple rally waves that reached the 200-day EMA in July, The stock pierced that resistance level and dropped into a test of new support that continued into October when a fresh rally impulse lifted price to a 22-month high at the .618 Fibonacci selloff retracement in the low-60s. It pulled back from that level into February 2017, with the subsequent uptick now testing December resistance.

The multi-wave pattern off the January 2016 low predicts proportional gains that should reach the .786 retracement level in the mid-60s as the next upside target. The technical outlook gets more interesting if the rally mounts that level because it then enters a critical test at the 2006 and 2014 highs while completing a multiyear cup and handle breakout pattern with a measured move target in triple digits.

On Balance Volume (OBV) topped out at the end of 2014, long after the May all-time high print, and entered an aggressive distribution wave that continued into the first quarter of 2016. Committed buyers then stepped in, generating an impressive accumulation wave that’s lifted the indicator back into a test of the prior high. This signals a mildly bullish divergence, adding a brisk tailwind to the progressive uptick.

The Bottom Line

HOG is grinding through a healthy rebound after dropping to a multiyear low at the start of 2016. It could make a return trip to 2006 and 2014 resistance later this year, completing a cup and handle pattern that predicts much higher prices.

<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>

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