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Garmin Is on the Road to a Breakout

Who needs GPS? The company has diversified and is back on investors' radar.
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Many investors associate Garmin (GRMN) with automotive GPS devices, because that was the company's original claim to fame. Then smartphones became capable of handling that task, and Garmin disappeared from the investing public's consciousness.

Now Garmin is back. This stock is up 15% year to date, on top of last year's 30% gain. According to its weekly chart, Garmin is just getting started; the stock is about to break out and move higher from here.

Technically, Garmin may seem like a stock that has lost its way, but actually it's been consolidating gains achieved in early 2016, when the stock zoomed from $32 to $56. Since then, Garmin has formed an ascending triangle (black lines), and the stock is nearing the breakout point of that bullish pattern.

If Garmin can find its way above $56, the stock will break out of the ascending triangle. This will put Garmin on the road toward the low $60s, a peak the stock achieved in mid-2014 (red line). Beyond that, the next resistance level is above $100. Garmin reached that peak just prior to the market crash of 2008.

What is the downside for Garmin? The triangle's ascending trendline is near $52 and climbing, and it's reinforced by Garmin's 50-week moving average (green). Together, they create a formidable support area. If the price should break below the trendline and the moving average, longs should consider reducing or abandoning the position.

Supporting the potential breakout of the ascending triangle is the stock's MACD (moving average convergence divergence) indicator, which recently flashed a buy signal (shaded yellow).

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In order to survive, Garmin needed to diversify away from its troubled automotive navigation business. Garmin has successfully diversified into a number of areas, particularly involving the outdoors and camping. The company also provides a variety of niche products for boating and aircraft.

Garmin makes products that can help a boater locate a school of fish, or warn a cyclist that a car is approaching from behind. Garmin also makes products that can help navigate a ship or a plane via GPS.

The company also features a line popular of fitness trackers. Garmin has even teamed up with Disney (DIS) to create a line of fitness tracking devices just for kids.

Garmin is scheduled to report earnings on Nov. 1.

At the time of publication, Ponsi had no positions in the stocks mentioned.