I was very excited in December about the prospects for Great Lakes Dredge & Dock (GLDD). It had a macro picture that was looking up and a chart that was ready to explode to the upside on all timeframes. And it did — rising from $8.93 on Dec. 31 to a high at $10.07 in just over two months (over 12.7%).
Earnings releases keep getting pushed back. When the company finally did report, it restated earnings for the past two quarters and announced that the former CFO and current COO had resigned. Disaster ensued. (There’s something about the potential of accounting fraud that can do that.) The stock fell nearly 40% before it was over.
I learned a lesson: It’s hard to win a stock-picking competition when your stock gets pummeled.
But the stock has been recovering and could be on the road higher. What’s more, the macro picture is still intact.
The daily chart shows that the pullback went to an 88.6% retracement of the move higher from June 2012, before rising and closing the gap from the move lower. It would be natural to pause there — as it did. Recently, it made a bullish Golden Cross, with the 50-day simple moving average (SMA) crossing up through the 200-day SMA.
But there is some concern in this chart as well, with a Harmonic Deep Crab. This is a bullish pattern, but not until it reaches the reversal zone near $3.41. Yikes. The daily chart is presenting some mixed messages.
The weekly chart is more promising. The move higher off of the 200-week SMA to the prior breakout level pulled back to $7.75 and now has a Measured Move higher to $9.90.
The monthly chart also looks pretty good, as the price is consolidating at the prior resistance level of $8.40. With the accumulation/distribution building again, the key to this stock continuing to recover is a move over these three barriers: $8.60 on a daily and weekly close, and then $8.40 on a monthly close. At that point this stock is again a long-term buy with a price target of $9.80 initially and then $12.65.
At the time of publication, Harmon had no positions in the securities mentioned.