La-Z-Boy Incorporated (LZB) makes chairs and sofas including the company's popular recliners. The stock closed Wednesday, June 12, at $30.45, up 9.9% year to date and in bull market territory at 20.4% above its Dec. 24 low at $25.30. The stock is also in correction territory at 16.9% below its 2019 high of $36.63 set on Feb. 25.
Analysts expect La-Z-Boy to report earnings per share of 66 cents when it discloses results after the closing bell on Tuesday, June 18. The stock is reasonably priced with a P/E ratio of 14.22 and a dividend yield of 1.69%, according to Macrotrends. The furniture retailer faces headwinds that include year-over-year declines in sales of upholstery and case-goods segments.
The daily chart for La-Z-Boy
The daily chart for La-Z-Boy shows that the stock is struggling below its 200-day simple moving average over the past six trading days, with the average at $31.00. This puts the stock on the cusp of its monthly and semiannual pivots at $30.39 and $30.79, respectively. If this area holds, the upside is to its quarterly risky level at $34.43.
The weekly chart for the La-Z-Boy
The weekly chart for La-Z-Boy is negative, with the stock below its five-week modified moving average at $31.95 and above its 200-week simple moving average, or "reversion to the mean," at $28.68. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 30.30, down from 35.36 on June 7.
Trading strategy: Buy shares of La-Z-Boy weakness to the "reversion to the mean" at $28.68 and reduce holdings on strength to the quarterly risky level at $34.43. Monthly and semiannual pivots remain magnets at $30.39 and $30.79, 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 semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of each month. The quarterly level was changed at the end of March.
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 shares 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 their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting 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.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.