Whirlpool Corporation (WHR) beat earnings per share (EPS) estimates on Jan. 27, and shares popped as high as $158.44 on Jan. 29, up from the Jan. 24 close of $149.42. The stock then turned lower, trading as low as $145.21 on Jan. 31.

The consumer durables company makes home appliances including refrigerators and washing machines sold around the world under several brand names including Maytag and KitchenAid. Whirlpool stock is cheap with a P/E ratio of 9.47 and a dividend yield of 3.14%, according to Macrotrends. The company has beaten EPS estimates in six consecutive quarters.

The stock closed Friday, Feb. 7, at $149.21, up just 1.1% year to date and in bull market territory at 30.9% above its 52-week high of $114.00 set on May 31. The shares are 8.8% below the Oct. 21 high of $163.54. Last week's pivot was a magnet at $148.37.

In the longer term, Whirlpool stock is consolidating a huge bull market move of 4.8-fold from $45.22 set during the week of Dec. 23, 2011 to the all-time intraday high $217.11 set during the week of Feb. 6, 2015. The stock then declined 43% to a low of $123.60 set during the week of Jan. 22, 2016. The stock than rallied a bull market 64% to a high of $202.99 set during the week of June 16, 2017. This was followed by a bear market decline of 51% to a cycle low of $99.40 set during the week of Dec. 28, 2018.

This extreme volatility is the reason to study daily and weekly charts so you can capture trading opportunities. Use value levels to buy on weakness, and use risky levels as an opportunity to reduce holdings.

The daily chart for Whirlpool

Daily chart showing the share price performance of Whirlpool Corporation (WHR)
Refinitiv XENITH

The daily chart for Whirlpool shows the formation of a "golden cross" on March 7, 2019, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices would lie ahead. The 200-day simple moving average (in green) is now $144.43, which is a key level to hold on weakness. Note that this moving average has been crossed several times, providing buying opportunities.

The close of $147.53 on Dec. 31 was an important input to my proprietary analytics. The annual risky level at $252.90 is above the chart. The semiannual risky level at $164.06 is at the top of the chart. The quarterly value level is below the chart at $109.94.

The close of $146.17 on Jan. 31 was also an input into my analytics, and the monthly risky level for February is $178.54, which is above the chart. Last week's pivot is the horizontal line at $148.37.

The weekly chart for Whirlpool

Weekly chart showing the share price performance of Whirlpool Corporation (WHR)
Refinitiv XENITH

The weekly chart for Whirlpool is neutral, with the stock just above its five-week modified moving average of $148.53. The stock is below its 200-week simple moving average, or "reversion to the mean," at $156.28, which has provided a ceiling since the week of Jan. 24. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 46.92, up slightly from 46.02 set on Jan. 31.

Given the extreme volatility, this chart shows three horizontal lines. The quarterly value level is at $109.94, with the semiannual and monthly risky levels at $164.06 and $178.54, respectively.

Trading strategy: Buy Whirlpool shares on weakness to the quarterly value level at $109.94. Reduce holdings on strength to semiannual and monthly risky levels at $164.06 and $178.54, respectively.

How to use my value levels and risky levels: The closing price of the stock on Dec. 31, 2019, was an input to my proprietary analytics. Quarterly, semiannual, and annual levels remain on the charts. Each uses the last nine closes in these time horizons. Monthly levels for February were established based upon the Jan. 31 closes. New weekly levels are calculated after the end of each week. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels are in play all year long.

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.

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. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which typically is followed by gains of 10% to 20% over the next three to five months.

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