May 30th, 2012

FAST: Revisited

When I get disgusted about the market, frustrated that everything seems to be moving so slowly and despondent when charts fail to deliver as they promised, I turn to some prior posts and revel in those prognostications that worked out.  An example of one of those is the case of FAST (Fastenal) which I wrote about on February 4 in a piece entitled “Two views from the Heart and the Mind“.  The post was spurred by an analyst who indicated that FAST was over valued based on his analysis and he recommended it be sold; the previous FAST close was 48.30.

I took a different approach and looked at the very long-term chart for FAST and found that the stock was approaching the upper boundary of a 17 year ascending channel.  I concluded that

“An unequivocal ascending channel since 1994 with parallel trendlines and, yes, FAST is approaching the upper trendline.  If the stock continues to rise at its current rate then, after another 16% move higher, it will touch the upper boundary at around 56.  A slower ascent will allow a slightly higher touch point.  My conclusion is that one can get another 16% gain before the “overvaluation” becomes an issue.”

The chart I used was (click on images to enlarge):

Nearly four months have passed since that post and I must admit that we were both correct. FAST is currently at 44.60 so that other analyst was correct, the stock is down 10% since his call. However, I was correct also. FAST actually almost did touch the upper boundary; it hit a high of 55.05 on March 27, seven weeks after the above sell recommendation. That was a single point away from what I saw my target and 14.0% higher than the 48.30 sell recommendation price:

So when you begin to lose your confidence, you need some moral support, you feel like you’re being pulled in many directions in the battle of the bulls and bears, then it never hurts to look at your successes.  No one is going to give you moral encouragement, pat you on the back or give you that ego boost …. you have to do it yourself.

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