Sherwin Williams (SHW): Painting a Bullish Picture

Sherwin Williams is a name catching my eye, a great ascending triangle has setup above the prior resistance, now support at $79. If shares can push through $86.30 on volume it would measure a move to above $90. ADX is climbing after a bullish crossover and RSI is rising, although a bit overbought. Shares have topped out here previously and I do see a Red 13 on DeMark, but the 3rd attempt is usually the breakout move, so definitely one to watch in coming days.




As for the fundamentals, Sherwin Williams has a $9.1B market cap and trades 14.65X earnings, 1.13X sales and 23.6X cash flow, fairly valued for a Company with modest sales growth. The Company would benefit from the recent action in commodity prices, lowering raw material costs, and increasing margins and profits, the Raw Material Cost Index currently at 10 year highs. Home Depot and Lowe's both recently reported earnings, and the results were not spectacular as the housing cycle remains near the bottom, and no clear signs of a recovery, but as we enter the Summer, projects should pick-up and homeowners looking to increase the value/attractiveness of their homes could go for a new paint job. Home Depot noted on it's Conference Call that it expects more maintenance and repair than major renovations and is beefing up its paint offerings.

BofA-Merrill recently reiterated a Neutral rating and $92 price target after the Company's Annual Meeting. The Company is now targeting a younger demographic via HGTV and Digital Media and is also set to raised prices on coating by 7 to 9% on June 6th.

One trade to consider is the June $85/$90 1X2 Ratio Call Spread for a $1.40 Debit


A simple June $85 Call at $2 or Better Looks Fine As Well