Harley-Davidson, Inc. (HOG) reports second quarter earnings before the opening bell on Tuesday, July 23, with the stock below a "death cross" since March 8, 2018. This company makes the iconic brand of motorcycles seen on the road again and again.
Harley shares closed the first half of 2019 on June 28 at $35.83, which became a key input to my proprietary analytics. Left over from the first half of the year is the annual risky level well above the market at $64.37. The risky level for July is $34.59. The value level for the second half of 2019 is $32.94. The third quarter value level is below the market at $28.38.
The daily chart shows a "death cross," and the weekly chart ended last week with a downgrade to neutral. Fundamentally, Harley stock is relatively cheap, with a P/E ratio of 10.10 and a generous dividend yield of 4.30%, according to Macrotrends.
Analysts expect Harley to report earnings per share of $1.42 when it reports results before the open on Tuesday, July 23. Wall Street expects another quarter of disappointing of sales in the United States, which would lead to the tenth consecutive decline in U.S. sales. The company is looking for strong international sales of smaller Harleys including all-electric models. The guidance on this front will thus be important. It seems that it will be tough to find buyers of the LiveWire electric motorcycle at $30,000 a pop!
In the longer term, Harley stock is consolidating a bear market decline of 32% from its 52-week high of $46.22 set on Oct. 1 to its Dec. 24 low of $31.36. The stock closed Friday, July 19, at $34.85, up just 2.1% year to date and up 11.1% from its Dec. 24 low of $31.36. The stock is in correction territory at 15.8% below its 2019 high of $41.40 set on April 18.
The daily chart for Harley-Davidson
The daily chart for Harley shows the stock below a "death cross" that was confirmed on March 8, 2018, when the 50-day simple moving average (SMA) fell below the 200-day SMA to indicate that lower prices lie ahead. This negative was in play when the stock traded as low as $31.36 on Dec. 24. So far in 2019, the stock could have been sold on strength to its 200-day SMA between April 5 and April 23, when the average was $39.55.
The weekly chart for Harley-Davidson
The weekly chart for Harley is neutral, with the stock below its five-week modified moving average of $35.99 and well below its 200-week SMA, or "reversion to the mean" at $46.90. The 12 x 3 x 3 weekly slow stochastic reading rose to 38.75 last week, up from 35.74 on July 12.
Trading strategy: Buy Harley shares on weakness to the monthly, semiannual, and quarterly value levels at $34.59, $32.94, and $28.38, respectively, and reduce holdings on strength to the 200-day and 200-week SMAs at $37.18 and $46.90, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on June 28. The quarterly level was also changed at the end of June.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.