Strong Trend For Ramsay Health Care

This story features RAMSAY HEALTH CARE LIMITED. For more info SHARE ANALYSIS: RHC

Bottom Line 25/07/17

Daily Trend: Down
WeeklyTrend: Up
Monthly Trend: Up
Support Levels:  $70.83 / $62.15
Resistance Levels: $73.94 – $75.70 / $84.08

Technical Discussion

Ramsay Health Care ((RHC)) is an operator of hospitals. The Company operates approximately 223 hospitals and day surgery facilities across Australia, the United Kingdom, France, Indonesia, Malaysia and Italy. The Company's sections include the Asia Pacific, UK and France. It’s facilities cater for a range of healthcare needs from day surgery procedures to complex surgery, as well as psychiatric care and rehabilitation. In Australia, it operates approximately 70 hospitals and day surgery units. In the United Kingdom, the Company provides independent hospital services in England, with a network of over 35 acute hospitals and day procedure centers providing a range of clinical specialties to private and self-insured patients, as well as to patients referred by the National Health Service (NHS). It also operates a diagnostic imaging service and provides neurological services via its three neuro-rehabilitation facilities. For the six months ending the 31st of December 2016 revenues increased 3% to A$4.32B. Net income pertinent to common shareholders increased 14% to A$249.3M. Broker consensus is currently “Hold”. The dividend yield is 1.7%.

Reasons to be cautious (bounce short-term)
→ Hospitals and pharmacies in Australia support the growth outlook.
→ A stronger AUD/GBP present headwinds.
→ Tariff reductions in the UK and France.
→ Quality of future growth now questionable.
→ The CEO is retiring with a successor yet to be named.
→ The recent upgrade to FY17 may not be sustainable with the CEO leaving.
→ Price is testing a zone of support which if breached would bearish over the coming months.

Price was hovering around a line of resistance during our last review with a push above required to provide confidence that the target just beneath $80.00 was going to be achieved. The breakout has unfolded very nicely although a decent retracement has been kicked in over the past few weeks. The smaller degree patterns are now at a very important juncture with an upside move needing to kick in pretty much immediately to keep our bullish aspirations over the medium term alive and well. Yesterday’s low tagged the 61.8% retracement level of the whole movement higher from the low of wave-B. Should price break down through the typical retracement zone there’s an increased chance that the patterns are going to morph into something a little different – and in this case less bullish.

The line in the sand is $70.83 with a push beneath being less than ideal. One small positive is Type-A bullish divergence on this daily chart although it’s a weak example without the deep “V” that we often talk about. Bigger picture there is no doubt that the trend has been exceptional although since March 2015 it’s been more of a sideways movement with a bias to be upside. In fact, if the sideways consolidation continues we’ll have a good example of a Head & Shoulders topping pattern which would have bearish repercussions further down the track. At this stage, it’s something to watch only.

Trading Strategy

Should demand start to appear pretty much immediately you could accumulate partial positions with the expectation that the wave equality projection up at $79.64 is going to be tagged over the coming months. However, before getting involved just be aware that a push beneath yesterday’s low decreases the chances of getting our wanted leg higher. We’ll continue to stand aside for the time being although as the longer-term trend is so strong I’ll continue to follow it and look for the next big buying opportunity. Of course, if the H&S pattern proves itself the next opportunity will be to the downside.
 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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