Despite the current economic slowdown, business has been good for FLIR Systems Inc (FLIR), “the world leader in thermal imaging.” The company makes some pretty cool products which are used by military and police, as well as industrial and scientific organizations.
FLIR’s recently reported third quarter results showed that revenues increased by 3 percent and profits were up as well. The President and CEO of the company reported, “Operating margins were at record levels, operating cash flow was excellent, and backlog increased $20 million in our Government Systems division, improving 2010 visibility."
The Company's total backlog of firm orders for delivery within the next 12 months was approximately $608 million Sept. 30, a healthy backlog considering the company did a total of $835 in revenues for the first nine months of 2009.
STORY TIME
From a quick look at some simple fundamentals, the company appears to be poised for further growth. A good story is nice to have when we purchase a stock but without a strong chart to support it, a story is just a story.
Fortunately for FLIR, the stock is currently in an uptrend, which began as the stock experienced a heavy volume break past resistance in early September. The breakout lifted the stock above the moving averages (including the longer term 40-week or 200-day moving average).
This shows that, longer term, the buyers are firmly in control of the stock. Of course control can shift at any time due to unexpected news or order flow to the downside, but the path of least resistance is higher for FLIR, and the stock should be considered innocent until proven guilty.
PLAY TIME
The obvious question now is, how can I benefit? Looking at the daily chart (see the end, courtesy of RealTick and Towsend Analytics), you can see that the stock has shown a short-term consolidation between $28.50 and $29.15. I like to see these tight consolidations within a primary uptrend because they typically represent a period when the stock is consolidating before its next push in the direction of the primary trend (higher).
The way I would trade this stock is to buy strength as the stock trades above $29.15, then to protect the position with a stop near $28.45. If the stock breaks the recent range to the upside, it should gather sufficient momentum to continue higher, but a failure and subsequent lower low below $28.50 would invalidate the budding uptrend, which would give us reason to exit with a small loss.
If shares of FLIR can trade above $29.15 and continue higher, the logical area we would expect the stock to encounter resistance would be near $32, which would be the upside target for this stock.
You can see on the weekly timeframe that $32 was an area of difficulty during fourth quarter 2008, and a return move to that level would likely be welcome to buyers from a year ago who may be looking to exit the stock to break even.
FOLLOW UP
If you followed last month’s idea (Nutri-Systems Inc), the profit objective of $22.50 has been obtained. If you have not taken profits, the stop should be raised significantly.