Titan Machinery Tradable?

09/09/08 10:07:14 AM

by Koos van der Merwe

Are you looking for a company to invest in when the market starts to recover? If so, consider Titan.

Security: TITN
Position: Accumulate

Titan Machinery (TITN) represents a diversified mix of agricultural, construction, and consumer products dealerships located in the upper Midwest with their headquarters located in the heart of the Red River Valley in Fargo, ND. There are 48 store locations located in North Dakota, South Dakota, Minnesota, Iowa, and Nebraska.

Titan Machinery is a dealer for Case IH, Case Construction, New Holland, and New Holland Construction and also represents shortline equipment to meet specialized customer demand and niche product needs.

FIGURE 1: TITAN MACHINERY. This stock was listed in December 2007, closing the first day at $9.48. The price rose to reach a high of $34.49 by June before eventually declining.

Graphic provided by: AdvancedGET.

TITN was listed on the NASDAQ stock exchange on December 6, 2007, closing at $9.48. The price of the stock rose rapidly to reach a high of $34.49 by June 25, 2008, before declining. On June 16, the company reported first-quarter fiscal results, with operating income increasing to $6.4 million compared to $2.8 million in the same period a year ago. (See Figure 1.)

So what went wrong? Why, as the chart shows, did the stock price drop? Was it the state of the overall US economy, or was it that the company missed the analysts' profit number? Whatever the reason, the stock price has fallen in what appears to be a classic bear ABC pattern, even though defining a five-wave Elliott wave uptrend is difficult and not attempted on the chart.

Do note how the A-wave fall found support on a 38.2% Fibonacci retracement, but the 50% retracement was penetrated as the price found support at a level above the 61.8% retracement. The price has since risen in what does appear to be a wave 1 as it broke the a-b resistance line, and this in spite of a falling relative strength index. The blue arrow on the chart suggests that the indicator could be giving a buy signal at a level higher than the standard 30 horizontal line. This will only be confirmed by a second buy signal at the same level. The stock price has fallen into what could be a wave 2 at approximately the 50% retracement level. Only time will confirm a new bull trend from this level.

This is a stock that should be on your watchlist. Fundamentals are strong, and the share did originally buck the market downtrend, succumbing only after first-quarter results were released. On September 2, the company announced that it will be releasing its second-quarter financial results ending July 31 before the market open on September 15. With the market's current volatility, especially after the announcement concerning the nationalization of Fannie Mae and Freddie Mac, the share could be overlooked.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Titan Machinery Tradable?

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