Novanta Inc. (NOVT) short.All description on the chart.
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Novanta
COHERENT: The Nested "Mega" Cup Breakout - 2018 PT: $415So, I tried doing as much research into what a backwards Cup & Handle pattern is, or if such a thing is actually a "thing" and just gave up. If anyone has any insight or experience with them, I would love to hear it and learn please.
I believe the tariff and trade war narratives are artifically overblown. There is no way two super powers are genuinely going to break the global economy rather than find a way to profit off the volatility and enrich those who've positioned themselves strategically. Demand isn't going to diminish, people will pay for COHR's products globally. The first cup will fill in back to a comfortable $220 level that rides along the yellow, long-term baseline. Momentum from the cup filling back in will spark money to pour back in around September, right when most of the tariff news should have run its course and been sorted. This money will rally the stock up towards the $280-300 range (Golden Cross in play at this point?) and news of the next iPhone and other products coming for Holiday 2018 from other companies will have dropped.
Seeing the epic rally back up will fill the Mega Cup and once the stock has retraced back up to $320 around November, the moon shot rally upwards towards $400 will take off. Volatility will no doubt be in play from midterms, so people seeking a safe, grounded, albeit "expensive" trade may consider entering at this point. If sentiment after the midterms is high for economic expansion both domestically and globally, I don't see $400 being out of the question if the volume is there. Banks and financials will have had to recover some, the third rate hike should have taken place, commodities index should have recovered and emerging markets should no longer be suffocating, so that they can also participate in the global growth story and contribute to the 2H18 cycle. It sounds like a lot, but the windows are all there and slowly moving towards each other to line up. If COHR was being manipulated for a "perfect" trade, then this may well be where it was designed to go.
(ADDITIONAL NOTES)
COHR was flying last year, in part because of the OLED ramp up, but the Rofin acquisition was also in play. Coherent is a well diversified, educated and disciplined company. Earlier this year, the drama/rumors of the iPhone X being a failure began to spread and tank both Apple stock and perceived OLED demand. Both OLED and COHR got slammed relentlessly. Price dropped under $240 and expected to slow down. Resistance was found around $210, but it took another dive, as it is not regularly followed. I don't believe it has a lot of exposure through ETFs and other index funds either. Stocks with less exposure and coverage aren't "cool" or "fun" to watch, let alone invest in. Without any real coverage or news from Coherent themselves, the stock went into another free fall into levels not seen since the end of 2016. The stock carries a "BUY" recommendation across the board.
1) "...Apple is planning to get LG as its second OLED supplier for its OLED screens and will initially deliver between 2 and 4 million units....Related sources claim that LG Display wants to take a bigger cut, but it's not ready to meet the full demand for OLED panels."
2) "In October 2017 Japan Display has decided to halt its plans to turn its minority stake at JOLED into a majority one, and so JOLED started to seek external financing to support its plan to start mass producing OLEDs in 2019 at the JDI plant in Nomi, Ishikawa."
3) "...(China) also approved...a $2.3 billion joint venture organic light-emitting diode (OLED) plant to be built by South Korea's LG Display Co Ltd (LPL)."
OLED isn't just phones or TVs. It's also automobiles (CES made that very clear) wearables and displays on just about anything. Micro-LEDs will eventually come and COHR is aware and ready. I firmly believe there is going to be at least one more, powerful OLED ramp up to prep for 2019/2020 production rates.
Mad Breakout to $65? Subtle Climb to $60? Quiet Retrace to $53?Oh Novanta. So many possibilities for such a great company. Please forgive the maddening amount of clustered lines. The primary trend line is massive and seemingly unstoppable for a reason. Even though it's gone parabolic, its story is rock solid and almost sexy with everything they have a hand in.
As a leader in medical and advanced, industrial markets, Novanta went through a period of optimization several years ago, is currently in organic growth mode and is accelerating its scale from now until 2020 in order to DOUBLE their annual revenue. Oh, and as of their last public statement, they're still on track to do so. Quality products, leadership and personnel (over 375 engineers), coupled with proprietary technologies and over 400 patents, Novanta maintains a stoic and disciplined M&A schedule in order to maintain its edge and continue to innovate by divesting around 9% of revenue in R&D. The crossover between their sectors is astounding. Organic growth, momentum, acquisitions, a great M&A pipeline and leadership positions across key medical and industrial markets are providing, as Matthijs Glastra said, "...a solid foundation for sustainable, profitable growth." If you want a laser, robotics and high level medical play, this is it.
Hold Novanta long term. Short term, if you're looking to just trade and not invest, there's been some massive momentum up from the previously, consistent levels held all of April. Based on how the stock has bounced off its bottom trend line, it was a good period of accumulation leading up to another spurt of gains towards the $58+ level. If it should shoot past this and hit what could easily be $65 (based off the previous $15+ jumps) sell immediately, because everyone else obviously did, twice.
A retrace back to $53 off this momentum isn't bad and will surely hold or prep for the bounce back up to the $60 range outlined above.
