AMP: Stay Away

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

Technical Discussion

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.

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