AMP Not There Yet

Technicals | Jun 19 2019

Bottom Line 18/06/19

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $2.07
Resistance Levels: $2.43 – $2.77 / $3.50 – $3.69

Technical Discussion

AMP Limited ((AMP)) is a financial services and wealth management company operating across financial planning, insurance, asset management and retail banking. It has a significant network of 4300 advisors across Australia and New Zealand, as well as relationships with independent financial planning groups. Its asset management business is extensive with large and diversified portfolios across all major asset classes. Full-year profit declined by 97% to $28 million which was beneath most forecasts. Not surprisingly the dividend has been slashed. The Royal commission findings have damaged the company’s reputation. Broker / Analyst consensus is currently “Hold”. The dividend yield is 6.1%.

Reasons to be cautious:
→ It could look a bargain once it returns surplus capital although this could take years to unfold.
→ The “protecting your super package bill” is going to adversely affect earnings.
→ Royal commission findings triggered a one-off spike only.
→ The risk of regulatory action remains.
→ Recent results not taken well by the market.
→ Earnings affected by an increase in the cost base.
→ Earnings risk remains to the downside.
→ No obvious catalyst for an improvement in business.
→ Continues to de-risk the life business.
→ The technical picture continues to deteriorate.

There appeared to be some light at the end of the tunnel during our last look at AMP which came on the back of the termination point of the falling wedge coinciding with a minor line of support. Price had even broken higher although as can be seen strength petered out almost immediately. The problem is, the bad news just continues to flow for this company which means sentiment remains extremely low. The latest downturn was triggered by further conditions from APRA which again has scared off investors.

From a technical standpoint nothing too much changes although I have amended the upper trend line of the Falling wedge (which are also known as Ending diagonal triangles in Elliott terms). The upper boundary of the pattern needs to be overcome in a move that sticks if something more bullish is going to unfold. Not impossible, although the lack of demand is clear to see which isn’t instilling us with a great deal of confidence at this time. However, sentiment can change quickly which is something we’ll be on the lookout for over the coming weeks and months.

Nothing goes down in a straight line indefinitely and at some juncture we are going to see a bounce. It’s a question of when. Interestingly, bullish divergence is still evident on the weekly chart (not shown) although at this juncture it’s only triggered a sideways move as opposed to something more bullish. Ideally this is a trait that will change, though bottom line is the patterns need to prove themselves which at this juncture they simply aren’t doing. We can only retain a neutral stance at this time.

Trading Strategy

With a myriad of stocks continuing to trend nicely it would be a very aggressive strategy to want to be involved in a stock like AMP which continues to look lacklustre. However, if you are a fan of the company and suspect it’s oversold you could still buy following a push up through the upper boundary of the wedge although it may be wise to wait until the minor pivot high $2.28 is overcome before jumping on. Place the protective stop just beneath the prior pivot low at $2.06. I’m not going to make a formal recommendation as price needs to prove itself before getting involved. It remains on the watchlist.

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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