What Could Go Wrong?

It is time to buy!

(from gowinnebago.com)

Wait, I’m not talking about yanking out that credit card and buying a new Winnebago Vista® online (I wonder if UPS delivers this item). WGO broke out in impressive fashion, on very strong volume:

IBD highlighted the stock in Tuesday’s New High List Analysis:

‘Winnebago (WGO) broke out of a base in volume that was three times more than average.

The maker of recreational vehicles had a tough time moving up after clearing a buy point at 20.93 in late May. Volume was light when Winnebago surpassed that level.

But this time, as the stock cleared a handle with a 21.63 buy point, the price and volume was clearly bullish.

Winnebago on Thursday reported a 108% surge in earnings for the May-ended quarter.  Winnebago’s earnings performance started turning around quickly a year earlier.

Sales growth has ranged from 35% to 47% the past three quarters, despite a mediocre SMR Rating of C.”  (courtesy of Investor’s Business Daily)

On June 27th, Jim Cramer reiterated his Buy signal on WGO.

The stock has strong accumulation, and the recent earnings and revenue growth would make most companies jealous.

WGO earnings and revenue growth

(courtesy of MarketSmith, Inc)

The number of funds holding WGO has increased from 203 to 250 over the past year.

What could go wrong?!!!

Well, vacation homes on wheels may sell well in the spring. But, in North America, it’s just possible sales will fall off in late summer, going into fall. Remember, the stock market is supposed to anticipate. If the sales will probably fall off in a couple of months as we head into fall, how likely is it the stock will stay strong?

A look into the seasonal pattern provides that answer. Strong seasonal patterns are usually track records of institutional participation. Institutions do their homework and they understand seasonal sales cycles.

Looking at the track record over the next 16 weeks, which this year takes us into late October, WGO has lost an average 6.2%, with losses in 21 out of 29 years:

That strong 2009 gain affects the results. The average loss for all the other years is even worse than 6.2%. Notice how many years produced double-digit losses.

Not every year was a loser, and this year may justifiably be another year of strong gains for WGO. But there are other stocks that are breaking out and either have a good track record of gains, or at least don’t have a strongly negative seasonal pattern. I am far more comfortable trading the stocks where the movement matches the seasonal. I’ll pass on Winnebago this year.

Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, type in www.markettamer.com/seasonal-forecaster

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2013 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg’s passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

 

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