Thermal management technologies company Gentherm (NASDAQ:THRM) could rank among the biggest surprises this earnings season — and in a good way. No, circumstances do not appear auspicious in the least. Since the beginning of this year, THRM stock suffered a loss of nearly 39%. Over the past 52 weeks, the equity has hemorrhaged over 51%, a simply disastrous outing.
On a fundamental note, some might even argue that Gentherm “deserves” the erosion of value. As a global leader in innovative thermal management and pneumatic comfort technologies for the automotive industry, there’s no question that Gentherm is relevant. At the same time, economic pressures suggest that people will greatly curtail new vehicle purchases, thus impeding the forward progress of THRM stock.
Per the company’s website, Gentherm also provides medical patient temperature management systems. Still, its bread and butter very much remains the automotive comfort systems markets, which includes components such as adjustable lumbar support and customized posture assistance. Again, it’s wonderful stuff. However, the economic outlook has cast a dark cloud over THRM stock.
Nevertheless, speculators hoping for a shocking recovery — however brief — just might get it. Gentherm will release its earnings report on Thursday before the opening bell, providing a chance for management to set the desired framework. Subsequently, the report could coincidentally mark a possible pivot in sentiment.
In my opinion, patterns rule the market, setting guardrails and guidelines as to where price discovery will likely manifest and transition from one phase to another. However, in attempting to decipher these patterns, analysts make a critical error, attempting to predict price from price.
All too often, the financial publication space is replete with phrases such as “wait for confirmation” or “the stock may bounce from support.” However, these statements are declarations of perceived value, not necessarily real or objective value. Fundamentally, price by itself has no meaning — it is simply a scalar reality of an open-ended nature.
Because of this continuous signaling problem, transitions are practically impossible to quantify (because price does not end). To get around this dilemma, I converted the continuous signal of THRM stock and compressed it (via mathematical abstraction) into 33 genetic strings. In this manner, price discovery becomes quantifiable and categorical, enabling the visibility of patterns.
Since these patterns often cluster and recur, they bring (in my opinion) predictive value.
Currently, THRM stock is riding in totality a 3-7 sequence: three weeks up, seven weeks down, with a negative slant throughout the time period. Though this pattern suggests that the bears are in control, historically, it has also signaled a bounce back — nearly 77% of the time, THRM has popped higher in the subsequent week.
Further, the median return under the positive pathway is 4.44%. On the other hand, the median loss under the negative pathway is 2.85%, indicating that bears who get too greedy here would be taking an unusually large risk.
To be 100% clear, no one can perfectly predict when sentiment shifts occur in the market. That said, it should be noted that, as a baseline, the odds that THRM stock will rise over a one-week period is only 47.42%.
At almost 77%, it’s enough of a dramatic swing for daring speculators to take note of.
