Herman Miller Reports With Potential Technical Downgrade

Herman Miller, Inc. (MLHR) makes office furniture concentrating on the education and health care industries, general office needs, and home furnishings. The stock is above a “golden cross,” but its weekly chart will be downgraded to negative if there is any disappointment in the earnings report set be released after the closing bell on Wednesday, June 26.

Herman Miller stock closed Monday, June 24, at $37.62, up 24.4% so far in 2019 and in bull market territory at 31.3% above its Dec. 26 low of $28.55. Herman Miller shares are 5.2% below the 2019 high of $39.70 set on May 3. The stock set its all-time intraday high of $41.85 during the week of Jan. 26, 2018.

Analysts expect Herman Miller to report earnings per share of 77 cents when the company discloses results after the closing bell on Wednesday, June 26. The stock is reasonably priced with a P/E ratio of 13.64 and dividend yield of 2.11%, according to Macrotrends. There is not a lot of earnings coverage for this stock from Wall Street, so company guidance will be important given the uncertain global environment.

The daily chart for Herman Miller 

The daily chart for Herman Miller shows that a “golden cross” was confirmed on March 29 with the stock at $35.34. A “golden cross” occurs when the 50-day simple moving average (SMA) rises above the 200-day SMA and indicates that higher prices lie ahead. The stock set its 2019 high of $39.70 on May 3, and then weakness held the 200-day SMA at $35.44 on May 31.

The close of $30.25 on Dec. 31 was an important input to my proprietary analytics. Its annual value level remains at $32.99. The 50-day and 200-day SMAs are $37.90 and $35.42, with the stock between these levels.

The weekly chart for Herman Miller  

The weekly chart for Herman Miller will be downgraded to negative it the stock ends this week below its five-week modified moving average of $37.40. The stock is above its 200-week simple moving average, or “reversion to the mean,” at $33.11. Note how the “reversion to the mean” (in green) has been a magnet since the week of Jan. 8, 2016, when the average was $26.87. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 59.95 this week, down from 61.63 on June 21.

Trading strategy: Buy Herman Miller shares on weakness to the 200-week SMA at $33.11 and to its annual value level at $32.99, and reduce holdings on strength to its May 3 high of $39.70.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level changes at the end of each month. The quarterly level was changed at the end of March.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

The close on June 28 is the second most important for 2019 in terms of my analysis. This close will be an input to my proprietary analytics and will generate new weekly, monthly, quarterly, and semiannual levels.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.