Garmin Ltd. (GRMN) beat EPS and revenue estimates while issuing inline fiscal year 2017 guidance in their fourth-quarter earnings report on Wednesday morning. The news triggered a strong buy-the-news reaction, lifting the stock to a 6-month high that should presage even stronger gains in coming weeks. The rally could even mark the next phase of a larger-scale recovery that finally brings the 2007 high in triple digits into view.
The GPS giant got booted from the Nasdaq-100 index in 2015 and has fallen off the trading screens of many market players since that time. However, the keepers of the tech-heavy index could eventually regret their decision because the company now sports a market cap close to $10-billion while engaged in a major comeback that could open the door to dramatic investor returns.
GRMN Long-Term Chart (2000-2017)
The company came public near $10 (post one stock split) in December 2000, right in the middle of the Dot-com bear market, and traded sideways in a 7-point range into a December 2002 breakout. The subsequent uptrend continued into the December 2003 high at $29.74 and gave way to a brutal decline that relinquished more than half of the stock‘s value, coming to rest at $14.04. Keep that level in mind because it came back into play during the 2008 economic collapse.
A recovery wave reached the 2003 high at the end of 2004, giving way to a 2005 breakout that generated substantial momentum, starting in 2006. That rally entered a parabolic phase in June 2007, more than doubling in price into the October 2007 all-time high at $125.68. Aggressive sellers then took control, generating a broken bubble that found support at the 2004 low in the upper teens in November 2008.
A bounce into the second half of 2009 confirmed severe technical damage, failing to pierce the 25% retracement of the triple digit decline. The stock then settled into a sideways pattern that took more than two years to clear that minor barrier, ahead of a 2012 breakout that failed to hold new support. Sellers took control once again, dropping the stock into the lower-30s, ahead of a larger-scale recovery wave that topped out at a 6-year high in July 2014.
Choppy two-sided price action has continued into 2017, with a 4-year low in January 2016, followed by a strong bounce that’s now reached the .786 retracement of the 2014 into 2016 downtrend. Rally waves between 2009 and 2014 have generated a rising highs trendline, with resistance now centered in the low-70s, at the 50% bear market retracement. This price zone marks a logical target if the stock continues its upward trajectory.
GRMN Short-Term Chart (2015–2017)
A major decline found support in the low-30s at the start of 2016, giving way to a recovery wave that reached the .786 Fibonacci retracement level in August. It pulled back to the 200-day EMA earlier this month and turned higher into earnings, with the initial reaction generating a rally into 2016 resistance at $55. A breakout above this level should complete a 100% round trip into the 2014 high in the lower-60s, ahead of a continued upside into the rising highs trendline.
On Balance Volume (OBV) topped out at a multi-year high in 2014 and ground sideways into the middle of 2015. It then entered an aggressive distribution wave, dumping to a 3-year low in the first-quarter of 2016. Buying interest then perked up, generating a modest uptick that’s now lifted into 2015 levels. This proportional activity matches price action perfectly, pointing to a technical healing process that should continue into coming months.
The Bottom Line
Garmin has been on the recovery trail for the last 13 months and could now break out above the 2016 high in the mid-50s. The next upside target lies at the 2014 high in the low-60s, with that level likely to give way and yield a final buying surge into the low-70s.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>
Garmin Shares Pointed North After Earnings
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