Willis Lease Finance Corp. (NASDAQ:WLFC)’s share price formed a multiple top pattern, indicating a reversal is taking place.  The stock currently sits at $26.28.

A multiple top is a reversal chart pattern showing the failure of a stock to break through to new highs multiple times, making a strong sell signal.  Multiple tops can be of the double or triple variety.  A multiple top is usually formed at the end of an uptrend in a security.  When the uptrend falls back in the same area many days or even weeks apart, the security price falls back each time and creates a support level; i.e. the price level where the bull traders pick it up.  When it continuously fails to break through resistance offered at the multiple top area, the bear traders have succeeded pushing it beneath the support level. 

Multiple tops aren’t necessarily formed at the exact same price.  Accepted multiple top formations can be as much as 3% apart, according to chartists.

Traders usually short sell the security after the downside break of the level of support.  Short selling may be allowed at this time because of the higher trading volume that accompanies the downside.  The objective of the short sale is usually the difference between the multiple top and the support area.

For example, if a stock forms a triple top at $20, and has fallen back to around $17.50 after each failure at a new high, the short sale would be on a downside break of the $17.50 support level.  The profit equals the $2.50 difference between the triple top and support level (i.e. $20 – $17.50), meaning that trader had a price target of $15.00 on the short sale, for a profit of $2.50 ($17.50 – $2.50).

Aggressive traders who are keenly bearish on the stock might not wait for the downside break at $17.50 to short it.  They might enter execute the short sale after the stock has failed to break $20 for the third time, rather than wait for confirmation of the sell signal.

EARNINGS PER SHARE (EPS):

EPS is what each share is worth and indicates how much money their sharehoders would acquire if the company was to pay out all of its profits.  Earnings Per Share is computed by dividing the profit total by its share total.  If a company’s profit is $800 million and there are 40 million shares, then the EPS is $20.  EPS is a fantastic way to compare and contrast companies in the same industry.  When a company shows a steady upwards earnings trend, it is a good indicator that the company will dominate companies with a more volatile earnings trend. Willis Lease Finance Corp. (NASDAQ:WLFC)’s EPS is 2.07.  

RSI and P/E

How has it been performing relative to the market?  The stock’s price is $26.28 and their relative strength index (RSI) stands at 52.03.  RSI is a technical oscillator that shows price strength by comparing upward and downward movements.  It indicates oversold and overbought price levels for a stock.  

Willis Lease Finance Corp. (NASDAQ:WLFC)’s P/E is 12.71.  P/E is a valuation ratio of a given company’s current stock price as compared to its earnings.  A low P/E value suggests a stock is cheap as compared to earnings.  For example, a P/E value of 20 means that the price equals the total of 20-year earnings.  The average level is always different across the market and P/E must be compared per sector.  Willis Lease Finance Corp. is in the Services.  Their PEG, the ratio used to determine a stock’s value while taking into account the earnings’ growth, is 0.85.

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