It's been a very good run for shares of Lowe's (LOW) the past (lucky) seven years, since the 2009 crash, as the price has completed a (lucky) seven-fold increase in value from that $11 zone. However, luck as an investment strategy rarely lasts, and even more rarely lasts this long.
This monthly bar chart, above, shows the rise that can finally be counted as complete (per Elliott Wave and Fibonacci theories of predictive price behavior). While a few more sub-waves toward $84 +/-$2 can't be ruled out, the minimum requirements for labeling the rise from the February low are in place after this week's thrust above the April 4 high of $77. The key now is to use protection, shown above as the red line crossing through $75.50, in the form of a sell stop in order to prevent these wonderful gains from becoming potential losses. Also noted above, critical support is $68, below which will rule out further highs, until at least the February lows are broken.
More ominous are the green boxes that surround the $46 zone. Our objective DSE (decision support engine) has identified the price area of the horizontal green box as the value zone of a much-needed correction in this company's share price. The lighter green square represents the time window for a correction to bottom; September 2018 +/- 9 months.
One of the easiest justifications for this forecast is the bold blue lines in the upper and lower panes of the chart. The price pane shows higher price highs for the past year, while the stochastics pane shows lower highs. This is a condition known as a bearish divergence sell signal, which our DSE's hunter/seeker algorithms scan for at both major peaks and troughs in long-term trends. In this case, a peak is being stalked by our system, and it appears to be in its terminal moments.
The second chart, above, is the daily bar chart, zoomed in on the rise off the February low. Purple waves 1, 2, 3, and 4 are likely complete, with wave 5 either done, or nearly so, allowing for another up/down/up sequence to complete the entire rise. The pink sell box is already being probed, while only the purple oval remains unchallenged. Breaking below the low of Tuesday, at $75.50, will reduce odds of further upside progress to single digits, while increasing odds that the final price high is in place to well above 50%.
As of Thursday's close, price had breached the upper 2 standard deviation band (olive/gold line near $79), which controls 95% of normality. The orange line above it is the upper 3 standard deviation band, which controls 99.7% of normality. The zone between these two statistically significant extremes represents the equivalent of humans trying to survive at the peak of Mount Everest. While possible under perfect conditions for a few hours, planning to live up there for longer is impossible. The same is true for prices of most investment vehicles.
Therefore, if you are long, and enjoying profits, our DSE strongly suggests using the sell stop of $75.50 to keep those profits to yourself (especially if you are using leverage, like options or margin). If flat this name, consider establishing short exposure on a close below that sell stop level.
Within the next few weeks, likely by Labor Day, if not July 4, LOW should be back to the $74 level, with rapidly rising probability of being well on its way toward the low $60s. That's a potential 22% decline from Thursday's close near $80, a worthy decline to escape.