DDD 8/12/2013 – Earnings Disappointment?


3D Systems (DDD) reported earnings on July 30, 2013. The stock did not take off right away as investors had hoped, but things appear ready to change really fast. The next chart is an updated chart from my last DDD post, with the bottom purple channel one of my main concerns. Notice on this updated chart since the earnings report how DDD has twice come down and filled in the bottom purple channel, as indicated by the arrows. Both purple channels represent prior gap-up areas.

 

3D Systems (DDD) - Closing Prior Gap-Ups

3D Systems (DDD) – Closing Prior Gap-Ups

 

Notice the decreasing volume for DDD after earnings day while it was drifting downwards? There was very light selling going on while during the last 4 days the volume has been picking up while the share price is climbing. Todays strong, tall candle on increasing volume ended in DDD’s 3rd highest close ever. With volume picking up, DDD appears ready to make it’s next move. A close above $50.52 (it’s highest close ever that occurred on July 29, 2013) would send another signal that DDD’s uptrend is ready to resume. Look for the green trend line to offer support if this is the case. Also look for volume to pick up as new 52 week highs are being made.

 

So let’s look at an initial target price in this update. One price target that can be calculated is from a potential bull flag continuation pattern that I identified in a prior DDD update. Click here to see some of the statistics for bull flag continuation patterns I noted in a prior update before moving forward.

 

The next chart is a daily 6 month candlestick chart for DDD that shows it’s potential breakout from the bull flag continuation pattern.

 

3D Systems (DDD) Bull Flag Continuation Pattern Potential Breakout

3D Systems (DDD) Bull Flag Continuation Pattern Potential Breakout

 

The width of the flag was estimated at $8 on the above chart. The width can be used to estimate the height of the breakout. The $8 would be added to the point of the potential breakout at the top of the flag, which was approximately $47 on August 8, 2013. This would give a conservative short-term target of $55, or approximately a little over 10% from the current share price of $49.76 as of todays close.

 

For a more aggressive price target, take the length of the pole which is $24 and add that to the potential breakout at the top of the flag ($47 as noted above). This gives a preliminary target of $71.

 

So where is a good place to start since there are two different target prices that vary greatly? The truth is probably somewhere in the middle. But as the truth is being figured out, I will hold my shares until I calculate some price targets with other methods. Look for these in the next DDD update.

 

If you are bullish for the long-term future of 3D printing, then consider this an opportunity to make an initial purchase in DDD after a lengthy 3 month consolidation period. Remember to always scale into and out of positions. Do not try to make all your purchases or sales of a stock at 1 time as no one is good enough to time the market that well. Scaling offers an opportunity to enter into and out of positions while helping to minimize risk.

Until the next update, good luck trading.

 

Disclosure: I have made purchases of DDD at the following levels over the last 2 weeks since the earnings call – $48.50, $46.79, $47.73, $47.00 and $47.50. I now own approximately 75% of my intended DDD shares, which I intend on selling much higher.

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