Technicals | Oct 10 2019
Bottom Line 09/10/19
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $1.60
Resistance Levels: $2.07 / $2.20 – $2.36
AMP Limited ((AMP)) is a wealth management company. The Company's operating divisions include Australian wealth management, which provides financial advice services, platform administration, unit-linked superannuation, retirement income and managed investment products. For the six months ended the 30th of June 2019 revenues increased from A$7.15B to A$15.86B. Net loss was A$2.29B against income of A$115M. Revenues highlight the AMP Capital section increase of 18% to A$276M. Broker consensus is “sell”. The dividend yield is 8.2%.
Reasons to be cautious:
→ Investors still focusing on the downside risk in wealth management earnings.
→ Near-term earnings risk around the decline in assets under management and pressure on revenue margins.
→ Price has now hit the capital raising level at $1.60.
→ The recent announcement regarding the sale of AMP life taken badly by the market.
→ The “protecting your super package bill” is going to adversely affect earnings.
→ The risk of regulatory action remains.
→ Recent results not taken well by the market.
→ Earnings affected by an increase in the cost base.
→ No obvious catalyst for an improvement in business.
→ The technical picture continues to deteriorate.
One of these days we’ll be able to say something positive about the chart of AMP although that time hasn’t arrived yet. In fact, today the stock hit $1.60 which was the capital raising price. In normal circumstances we’d expect this level to attract demand from the big boys although we aren’t betting on it. It may deliver a reprieve over the short-term although there is no evidence that a major low is going to be locked-in any time soon. There are still many reasons to be sceptical with several of them mentioned above as being reasons for caution. The problem technically is that a significant zone of support going all the way back to 2003 has been overcome in a strong impulsive manner. In other words, there is no area of support beneath current levels which isn’t a good position to be in.
Also, on this weekly chart we can see that volume has increased significantly during the latest leg South which implies the smart money has been exiting. It’s a company in a strong downtrend and there is simply no point in trying to pick a bottom at this juncture. It’s anyone’s guess as to where price is going to finally turnaround – assuming it does which is by no means set in stone. We’ve mentioned before that a low is often locked-in when sentiment is at extreme levels and although this is generally the case there are no guarantees. Either way, signs of demand will need to appear before even thinking in terms of a decent bounce unfolding which at this juncture is clearly not the case. One thing is for sure, if those involved in the capital raising start to offload then there could be significant downside still to come although time will tell whether this transpires. The bottom line is, suggesting that caution is required is somewhat of an understatement.
“…We continue to review AMP as it does have a large following although it may be time to put it on the back burner for a while until something of interest crops up, either fundamentally or technically. One thing is for sure, there’s no reason to be looking for a buying opportunity at current levels…” Nothing changes apart from the fact that the capital raise price is now under pressure. The downside break from here could open the floodgates again although shorting it from here would be extremely aggressive. There’s always the chance that something out of left field could trigger a strong rebound which would be accentuated due to the amount of short-covering that will likely take place. It’s best left alone.
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