Herman Miller, Inc. (MLHR) makes office furniture, concentrating on the education and health care industries, as well as home furnishings. The company reported an earnings beat on Sept. 18, and the stock popped to an all-time intraday high of $49.40 on Sept. 19, which proved to be a failed test of its monthly risky level at $48.64. The stock is above a "golden cross" on its daily chart, and its weekly chart is neutral.
Herman Miller shares closed Friday, Sept. 20, at $45.33, up 49.9% year to date and in bull market territory at 58.2% above its Dec. 26 low of $28.66. The stock is 8.2% below its 2019 high of $49.40 set on Sept. 19. The stock is reasonably priced with a P/E ratio of 14.58 and a dividend yield of 1.85%, according to Macrotrends. The retailer now has a winning streak in terms of beating earnings per share (EPS) estimates for seven consecutive quarters.
Cautious comments concerning the China trade war contributed to the move off the high for shares of Herman Miller. The company is also in a transition period, in the process of moving into a new 620,000-square-foot distribution center.
The daily chart for Herman Miller
The daily chart for Herman Miller shows that a "golden cross" was confirmed on March 29, with the stock a buy at $35.34. A "golden cross" occurs when the 50-day simple moving average (SMA) rises above the 200-day SMA to indicate that higher prices lie ahead. The stock was a buy at its 200-day SMA on May 31, when the average was $35.44.
The close of $30.25 on Dec. 31 was an important input to my proprietary analytics. Herman Miller stock's annual pivot at $32.99 provided a buying opportunity Jan. 8 and Jan. 30. The close of $44.70 on June 28 was another input to my analytics. The second half semiannual value level at $41.47 provided buying opportunities between Aug. 15 and Sept. 3. The quarterly pivot at $44.05 was a magnet between July 1 and Sept. 18. The high of $49.40 on Sept. 19 was an opportunity to reduce holdings above its monthly risky level of $48.64.
The weekly chart for Herman Miller
The weekly chart for Herman Miller is neutral, with the stock above its five-week modified moving average of $44.06. The stock is also above its 200-week SMA, or "reversion to the mean," at $34.06. Note how the "reversion to the mean" was a magnet since the week of Jan. 8, 2016, when the average was $26.87. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 67.73 this week, down from 68.30 on Sept. 20.
Trading strategy: Buy Herman Miller shares on weakness to the quarterly and semiannual value levels at $44.05 and $41.47, respectively, and reduce holdings on strength to the monthly risky level at $48.64.
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 changes at the end of each month, most recently on Aug. 30. The quarterly level was 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.