Emerson Electric Company (EMR)

EMR has formed a beautiful Jeanty Buy pattern and has produced a buy signal on 9/5/08. The target price is $47.53. Now, if only I could superimpose a picture of the pattern on the wikichart. Perhaps someone at wikinvest can show me how to do so.

Well, now that I have learned how to upload pictures, I can show the pattern and the signal. But first, for those who need a little bit of an explanation of a Jeanty Buy pattern, take a look at http://www.wikinvest.com/image/LUV_BUY.jpg and you should be able to see all the components of the pattern.

Looking at the image you should see the 4 components of the pattern and see that the target price of $47.53 was reached on 9/19/08 when the high was $47.99

You can see the 4 parts of the pattern:

1) A downward move shown in the red rectangle from $56.41 to $47.53

2) A retracement with resistance at the 38% retracement level of $50.92

3) A resumption of the downward move

4) A bounce off the 38% extension price of $44.14 on 9/05/08 showing support at that extension level (Shown by the little red triangle on 9/5/08)

Since all 4 components of the pattern are present, we have a BUY signal. The target price is computed to be the bottom of the red rectangle, i.e. $47.53

As can be seen, on 9/19/08 we hit our target. The high on 9/19/08 was 47.99, just 46 cents above the target and then we closed at $43.84, a full $3.69 below the target. It almost looks as if EMR "reached out" to touch the target, and after having done so decided to turn around. Since one would have received the signal just before the close of 9/5/08, you could have bought EMR near the close of 9/5/08, say $44.22. Hitting the target of $47.53 means a gain of $3.31 or 7.49% in 15 days. This illustrates the power of the pattern. After seeing EMR go down from about $58 to $44 ($14 or 24%) in just 3 months, would you have considered buying it? But the pattern generated a signal calling for a buy with a potential gain of $3.31 or 7.49%. And the way the target was reached was rather (in my opinion) dramatic.

You can compare this signal and the pattern with another prediction made for GOOG on 9/10/08 at http://www.wikinvest.com/stock/Google_(GOOG)/Bulls/BUY:_Target_%24461.90 Go ahead, take a look and be prepared to be surprised by the similarities.

EMR has diversified revenue stream and geographical presence. Overall, it can hedge against dollar fluctuation and proxy for foreign developed/emerging markets. It has been raising dividends for last 52 years.

Also, EMR’s end-markets are cyclic and it appears that it knows how to wither such business environments. It has a strong balance sheet and competitive market positioning. The stock’s current risk-to-dividend rating is 1.43 (low risk). The current pricing of $41.17 is tad above buy range.

Reference

"Emerson Electric Company – Priced for Long Term Buy" Post from Dividend Tree Blog

EMR- is posied for the Global Infrastructure Build-out, Failing US Infrastructure (Grid), and Oil/Chemical profits going into process Controls Technology. Additionally, they have the best SMART valve technology and domestically based making International competitors feel the pain of a weak dollar when competing on price points. Overall, The Global Economy will benefit from MNC (Multinational Corporations) that are domestically based (see Deere,Cat, IR, etc)