Buyer Beware: Harley Davidson Gaining Favor, Losing Ground (HOG, GS)

This American icon has been the beneficiary of analyst upgrades by two heavyweight firms in the past two days. The stock should be surging, right? Not so fast. Yesterday, the fine people at Raymond James upgraded Harley-Davidson from Market Perform to Strong Buy and raised its price target to $50. Today, Goldman Sachs GS upgraded shares from Sell to Neutral citing steady U.S. motorcycle demand. Goldman also revised its price target from $32 to $42. Despite these ringing endorsements, investors have not jumped on board. In fact, they have taken the brief pops as opportunities to sell. Analyst upgrades are often surrounded with doubt; even more mysterious are the price targets that sometimes accompany them as they are often left unfulfilled. So, that brings us to recent price action. Harley just put in a new 52-week high of $43.15 on April 1st. You should also note that shares swiftly fell almost 10% from that level in seven consecutive losing sessions. That move created a technical double-top pattern on a six month daily chart; a major bearish omen. Yesterday, shares initially jumped 4% on the heels of the upgrade, but quickly got sold off and ended up closing at the bottom of the day's trading range. Today, the upgrade from Goldman Sachs had shares open to the upside, and once again shares immediately retreated into negative territory. The stock is currently down over 1% from yesterday's close. So what does all this mean? Where there is smoke, there is fire. When a stock cannot gain ground despite two major analyst upgrades, it generally does not bode well for the near term. Harley's shares are sitting at the top of a two year range and could easily see a retracement back to the mid to low $30's. Bottom Line, the timing of analyst upgrades is spotty at best and a smart investor should always take a closer look at the situation before making a move. A hasty entry can quickly have you seeing red. Look before you leap.