Technicals | May 24 2018
Bottom Line 23/05/18
Daily Trend: Up
Monthly Trend: Up
Support Levels: $8.93 – $8.62 / $7.50 / $7.21 / $6.78
Resistance Levels: $17.18
Goodman Group ((GMG)) is an Australia based integrated commercial and industrial property group that owns, develops and manages real estate, namely warehouses and large-scale facilities, business parks and offices globally. The company also offers a range of investment funds in the property sector which provide investors access to specialist investment management within the commercial and industrial property sector. For the six months ending the 31st of December 2017 revenues increased 1% to A$766.2M. Net income decreased 3% to A$542.7M. Revenues highlight the Continental Europe section increase of 12% to A$436.4M and the Asia section increase of 4% to A$112.9M. Net income was offset by Net consideration from disposal increase from A$3.4M to A$203.3M. Broker consensus is currently “Hold”. The dividend yield is 2.9%.
Reasons to be bullish:
→ Near-term earnings provide certainty suggesting it should continue to outperform its peers.
→ Further upside potential from urban renewal.
→ Demand for new developments, higher fund management fees and easing interest expenditures.
→ Dearing expected to decline to 1% by June 2018.
→ Outlook for FY18 through FY20 remains positive.
→ 81 projects worth $3.5bn in progress with 72% developments pre-sold.
→ Stable long-term customer base across diverse global organisations.
→ A strong balance sheet offers scope to choose inexpensive developments.
The big positive during our last review was the break up through the zone of resistance as this opened the door for the longer-term uptrend to continue. This has been the way forward with price action over the past couple of days being strong. As is usually the case, price came back to retest the breakout area last week before buyers returned which is a positive. Should today’s strength follow-through there’s every reason to remain bullish, with the expectation that price will head up toward $10.00 as a minimum. This is where the wave equality projection sits although there is an equally strong chance that price gets up through that level by a reasonable margin.
Much is going to depend on whether wave-(iii) or-(c) is in motion. If it’s the prior we’d expect the 1.618 projection of wave-(i) to be achieved which sits up at $11.50. Usually at this point, we mention bearish divergence on the weekly chart which of course has been cropping up all over the place recently. Not so here although our oscillator is sitting in the overbought position. This isn’t major reason for concern with strong trending stocks like this though and our oscillator could remain overbought for several weeks and even months. Zooming out to the bigger picture reiterates the technical damage that was inflicted on this stock off the 2007 high which doesn’t come as a big surprise considering the sector it sits within. A decline of over 90% was witnessed to the March 2009 lows. However, this still keeps the door open to continue up toward the typical retracement zone of that prior leg South which offers a continuation up toward $17.18 – $21.09 which is true even if a larger corrective pattern higher is unfolding. In other words, price could still double from current levels within a bounce only.
In some ways today’s spurt higher is less than ideal from a trading perspective although there’s still a low risk entry presenting itself. The strategy is to buy following a probe above today’s high at $9.34 with the protective stop set just beneath the new zone of support at $8.71. We’ll use a trailing stop to manage the position although as mentioned above, there’s no reason why $11.50 can’t be achieved in reasonably quick fashion.
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