Why technical analysis?
In previous parts of this series, we explored how Harley-Davidson’s (HOG) valuation multiples are higher than those of other motorcycle makers, including Honda’s (HMC). But while valuation multiples can help investors, it’s also important for investors to look at key technical support and resistance areas.
Investors can use these support and resistance areas to refine their entry and exit from the company’s stock. Now, let’s look at HOG’s stock price movement and find out some important technical price levels ahead of its 3Q16 earnings release.
Key support and resistance levels
As of September 27, 2016, Harley-Davidson’s stock was trading at $52.14. Until the end of 2Q16, the price was well below the downward sloping trendline, as you can see in the chart above. On July 1, 2016, the company’s stock rose nearly 20% from previous session’s close.
As noted in the first part of this series, these gains were primarily driven based on a rumor that an American multinational private equity firm, KKR & Company (KKR), was looking to buy out Harley-Davidson.
On the downside, a key horizontal support lies near $50.40, whereas on the upside, an immediate resistance is at $53.20. A recent swing high near $55.20 is likely to continue acting as an immediate resistance level.
How to benefit from technical price levels
Upward stock price movements could see resistance around resistance levels, and downward price movements could hit roadblocks around support levels.
However, a breach of support or resistance may trigger price action. Remember, a stock’s price typically witnesses a rally if a key resistance area is surpassed and a sharp fall if a key support level is broken. In both scenarios, investors could initiate favorable positions or manage their existing positions to benefit.
The US auto industry’s 3Q16 earnings
The two largest US automakers (IYK), General Motors (GM) and Ford Motor (F), are likely to report their earnings on October 25, 2016, and October 27, 2016, respectively. Investors should stay tuned to Market Realist’s Autos page for updates on analyst estimates on these companies.
Meanwhile, you can read about automakers’ efforts in the development of autonomous vehicles in Steering the Auto Industry: Investor’s Guide to Autonomous Vehicles, or you might check out Do August Vehicle Sales Point to a Slowing US Economy? to learn about US auto sales in August.