Intuit Inc (INTU) provides management software solutions for small and medium sized business, consumers and accountants. This includes tax preparation software which is important in 2019 given the Tax Cuts & Jobs Act. The company reported better-than-expected quarterly earnings after the closing bell on Thurs., Aug. 22. This extended its string of beating earnings-per-share estimates to 20 consecutive quarters. This led the stock to setting its all-time intraday high of $295.77 on Aug. 23.

The problem for the stock is the fact that it ended last week 5.8% off the high at $278.74. The stock is up 41.6% year to date and in bull market territory 52.6% above its Dec. 24 low of $182.81. Intuit did not hold its quarterly and monthly pivots at $286.28 and $281.71, respectively. If the weekly chart gets downgraded to negative the downside is to the semiannual value level at $240.81.

Intuit is not cheap as its P/E ratio is elevated at 49.68 with a puny dividend yield of 0.68%, according to Macrotrends. Despite solid fourth quarter results and increasing its online QuickBook subscriber base to 4.5 million, the company cut its first quarter earnings guidance.

The daily chart for Intuit

Daily Chart For Intuit

Courtesy of Refinitiv XENITH

Intuit has been above a ‘golden cross’ since Feb. 22 when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead. This tracked the stock to its all-time intraday high of $297.77 set on Aug. 23. The close of $196.85 on Dec. 31 was an important input to my proprietary analytics and the annual value level remains below the chart at $182.51. The close of $261.33 on June 28 was another important input to my analytics and the semiannual pivot remains at $240.81. This level is just below the 200-day SMA at $242.10. The monthly and quarterly pivots at $281.71 and $286.28, respectively, and were magnets on Aug. 23. These levels expire at the end of this week on Aug. 30.

The weekly chart for Intuit

Weekly Chart For Intuit

Courtesy of Refinitiv XENITH

The weekly chart for Intuit is positive but overbought with the stock above its five-week modified moving average of $273.12 and well above its 200-week simple moving average or “reversion to the mean” at $161.53. The 12x3x3 weekly slow stochastic reading ended last week at 80.71 and should fall below the 80.00 threshold next week. Therefore, a weekly close on Aug. 30 below $273.12 will downgrade this chart to negative.

Trading Strategy: Buy weakness to its semiannual value level at $240.81 and reduce holdings on strength to the quarterly pivot at $286.28.

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, the latest on July 31. 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 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 its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an “inflating parabolic bubble” as a bubble always pops. I also call a reading below 10.00 as being “too cheap to ignore.”

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.