A brief review of our 2017 roadmap is warranted as we’re coming up to almost a year since the forecasts. We couldn’t have known how strong and persistent the 2017 year’s advance would be, so let’s see how we did with our long term technical views.
3M Forecast: “…$178.57 Appears to be trading in an ascending triangle formation which is constructive. SCTR rating is middling at 51 indicating no urgency on the part of buyers. The PNF chart shows a threshold of 182 for a breakout which would move MMM to a more aggressive buy. Relative strength shows as a market performer. Upside target is 200, but a break of the 165 area of the uptrend line would cast doubt on the move. Expected to track the market…”
Actual: 3M closed the year at 235, a return of 32%, besting the Dow’s 25% return.
Now: The stock has etched out a steady and consistent uptrend above the 50 and 200 day averages. There has been some erosion in the SCTR ratings which now stands just above 50. If price moves below 230, it will hint that a pause in the trend is at hand.
AXP Forecast: “…AXP $74.08 Appears to be trading in an ascending double bottom pattern. SCTR reads at 81 suggesting steady accumulation although there is considerable congestion at the $76 area. AXP’s recent price run-up has made it an outperformer of the S&P. We expect that AXP will stall here…”
Actual: AXP closed at $98.59 a return of 32%
Now: Similar to 3M, the price trend has been consistent and steadily above the 50 and 200 day averages with the only detraction being the somewhat declining SCTR rating. Only a trend line break below $92 would be of concern.
AAPL Forecast: “…$115.82 Appears to be ready to resume its decade long uptrend after a mostly sideways 2016 trading range. We can see a possible ascending triangle on the weekly chart and the SCTR rating is at 76, though plateauing. There is a double top breakout possibility at $120 on the PNF charts, so will be vigilant for that. The stock trades as a market performer to the S&P. Preliminary target, $130. A close below $90 signals a drastic change in outlook…”
Actual: AAPL closed at $169 a return of 45%
Now: One of the strongest performers in the Dow last year, AAPL has been tracing out an ascending triangle pattern on the daily charts which points to higher prices just ahead. $200 is the target price. We’ve made comments about possible inflection points on the stock last year, but the trend is firmly intact. There’s no reason to turn bearish on AAPL unless some diverging momentum indicators appear.
BA Forecast: “…$155.68. Trading in a strong up channel after making a low near $100 in 2016. The SCTR statistic is at 82, still strong but the price distance above our moving averages in such a short term tempers any upside expectation. While the trend is strong, I expect that a better buying opportunity can be had after a period of consolidation….”
Actual: BA closed at $295 a return of almost 90%!
Now: The most stellar of the Dow’s stocks last year, BA virtually doubled. The rally ran unabated all year and its strength has pushed the price well beyond the 20, 50 and 200 day moving averages. Though strong, the risk reward is not compelling here unless we can go through a period of consolidation and the moving averages catch up with price. Sounds suspiciously like last year’s forecast!
CAT Forecast: “…$ 92.74. Trading in an up channel for most of 2016 and it looks to continue on this path. The SCTR is steady at 78 and the RS vs the S&P is higher. After a likely pause from the recent upswing, we expect a test of the old highs at the $112 area…”
Actual: CAT closed at $157 a return of 66%.
Now: Caterpillar looked very similar to BA. It trades consistently above all moving averages and there was no period of consolidation. This was reflected by the SCTR rating being pegged in the high 90’s all year. As good as it looks, we can’t find any good entry at this point for new money.
CVX Forecast: “…$117.7 A strong performer throughout 2016, looks to be in a narrow up channel. SCTR at 79 shows good buying support even with the price increase. The PNF chart shows a long pole up and the price is considerably above our favoured moving averages which tells me that a consolidation of price is likely before any continued advance. I expect price to stall here…”
Actual: CVX closed at $125 a gain of 6%.
Now: In fact CVX did drop to about the midpoint of the year before resuming its rally then. In the past 3 to 4 months it has begun to rally with a brightening oil outlook. It looks as if it has broken away from a bullish cup and handle weekly formation and is in the beginnings of a new up leg. We expect CVX to outperform the Dow this year.
CSCO Forecast: “…$30.22, …The PNF chart does show a recent triple top breakout however which puts us in the bullish camp. The chart price looks constructive despite the middling accumulation statistics. I expect a target of $36…”
Actual: CSCO closed at $38 a gain of 27%
Now: We like CSCO but the 50 and 200 day moving averages are slightly below in the mid 30’s which would be the best entry opportunity. The move on the monthly chart is getting vertical as it continues to make new all time highs, so caution is advised if long. On a pullback in the overall markets, we should be long CSCO.
KO Forecast: “…$41.46 This stock has been trading in a down channel for most of last year and there’s little that I can see that would change that direction. The SCTR stat is awful at 24 and the PNF chart recently gave a double bottom sell. The relative strength has been below the S&P all year so there’s no hint of any turn. Accordingly, we have no reason to be long the stock. In fact, the monthly chart, (not shown) indicates a divergence in momentum at recent highs, so if anything, a rally to the $43 to $44 area would cause me to want to be short…”
Actual: KO closed at $46 for a gain of 12%
Now: Not a great call, but still one of the underperformers (relatively speaking) of the Dow stocks. Despite its price trading above the moving averages, the SCTR ratings have been lackluster. Accordingly, I see KO as middling at best in the following year.
DIS Forecast: “…$104.22 Disney managed to negate a potentially very bearish double top pattern by moving sideways through most of 2016. Accordingly, a potentially bullish cup and handle formation looks to be developing which portends a move to a new high. The SCTR statistic is at 62 and climbing which hints at accumulation while the PNF chart shows a recent breakout. While the move in recent weeks has been strong, we expect more after a possible consolidation. Target is $120…”
Actual: Disney closed the year at $107.5 to show only a nominal gain for the year.
Now: This stock actually had some volatility in 2017, heading as low as the mid 90’s before rallying back at year’s end. While the 120 target was not reached, price action looks very bullish here and accordingly, we expect Disney to outperform the Dow this year.
DWDF Forecast: “…$73.4 This stock traced a steady advance throughout last year and accordingly, our statistics look favorable on it. The SCTR is at 67 and there was a recent breakout in the PNF charts. On balance, with price bumping against all time highs and far from moving averages, I’m inclined to be neutral on this stock because of the cross currents on our indicators…”
Actual: DWDP (Dupont) closed the year at just above $71. The stock went through a split and reorganization that only a team of accountants can figure out, but we will use the price of $59 as the base price as shown on the price charts. That being the case, the return was 20%.
Now: Dupont just broke away from a months long base and it will continue to move higher. I expect to see $84 this year.
Part 2 to follow