Winnebago Industries, Inc. (WGO) stock is in bull market territory since trading as low as $19.77 on Dec. 18 but in bear market territory at 23.9% below its June 21, 2018, high of $47.75. This is a familiar pattern of share price downside volatility of 2018 shifting to upside volatility of strength in 2019.
Winnebago makes recreational vehicles including motor homes. The company reported better-than-expected earnings on March 25, extending a winning streak to four consecutive quarters. Positive guidance helped the stock advance.
The daily chart for Winnebago
The daily chart for Winnebago shows the formation of a "golden cross" today as the 50-day simple moving average at $31.93 moved above the 200-day simple moving average at $31.83 to signal that higher prices lie ahead. Remember that this signal tells investors to buy weakness to the 200-day simple moving average.
The stock closed at $24.21 on Dec. 31, which was an important input to my proprietary analytics. This resulted in an annual pivot at $35.75 and a semiannual risky level at $39.95. The close of $31.19 on March 29 was also input into my analytics and resulted in a monthly value level at $30.20 and a quarterly risky level at $44.80.
The weekly chart for Winnebago
The weekly chart for Winnebago is positive, with the stock above its five-week modified moving average of $32.79. The stock is also above its 200-week simple moving average, or "reversion to the mean" at $30.84. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 77.92 this week, up from 71.98 on April 12.
Trading strategy: Buy Winnebago shares on weakness to the 200-day and 200-week simple moving averages at $31.83 and $30.84, respectively, with the monthly value level at $30.20. Reduce holdings on strength to the semiannual and quarterly risky levels at $39.95 and $44.80, 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 January and February and March. 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 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.