The world's largest medical device company Medtronic PLC (MDT) reported earnings before the opening bell on Tuesday, Feb. 19, with the stock above its 200-day simple moving average at $90.51 and with a positive weekly chart. Medtronic shares closed Friday, Feb. 15, at $92.27, up 1.4% so far in 2019 an up 13% since trading as low as $81.67 on Jan. 8. The stock is down 7.9% since setting its all-time intraday high of $100.15 on Sept. 26. Even though the technicals are positive, I believe that the upside for 2019 will be limited to my annual risky level at $100.62.
Analysts expected Medtronic to post earnings per share (EPS) of $1.24 to $1.26 when it released results, and the company beat estimates by posting EPS of $1.29, marking 12 quarters in a row of exceeding earnings expectations. The medical device firm's growth strategies should be enough to help the stock move higher. Given an aging population, therapy innovations should drive earnings. Medtronic's Cardiac and Vascular group offers new devices in left ventricular assistance, aortic value replacements and drug-coated balloons. In addition, diabetes treatment devices are starting to boost international revenues.
The daily chart for Medtronic
The daily chart for Medtronic shows the all-time intraday high of $100.15 set on Sept. 26, and then a secondary high of $99.41 followed its last earnings release on Nov. 20. The stock saw a negative "key reversal" on Dec. 4 as it closed the day below its Dec. 3 low of $97.92.
On Dec. 31, Medtronic shares closed at $90.96, which was the input to my proprietary analytics. This resulted in my semiannual risky level, which is the horizontal line at $93.59. My quarterly and annual risky levels are above the chart at $100.76 and $100.62, respectively. The Jan. 31 close of $88.39 generated my monthly risky level at $97.17. For this week, I show a weekly value level at $88.83.
The weekly chart for Medtronic
The weekly chart for Medtronic became positive at the close on Dec. 8. The stock is above its five-week modified moving average of $89.59 and above its 200-week simple moving average, or "reversion to the mean," at $81.98. The "reversion to the mean" was tested as a buying opportunity between the weeks of March 23 and April 6, 2018, when the average was $77.42. The low of $81.66 set during the week of Jan. 11 also tested the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading ended last week rising to 36.27, up from 31.31 on Feb. 8.
Trading Strategy: Buy Medtronic shares on weakness to the 200-day simple moving average at $90.51 and my weekly value level of $88.83, and reduce holdings on weakness to my semiannual, monthly, quarterly and annual risky levels at $93.59, $97.16, $100.76 and $100.62, respectively.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.