With the recent announcement and appointment of new CEO Craig Meller, we look at the effects this may have on the technicals of AMP. Craig has been appointed to oversee the wealth management company, with his first task to improve the wealth protection and life insurance side of the business.
If you bought this stock roughly twelve months ago you would have been pretty pleased with its progress up until mid May of this year when it hit resistance levels from April 2011, and subsequently continued its downward slide all so familiar with long term holders. This was a strong buy in September of last year when we saw a pullback into an area of support, flipping previous resistance into support. This stock had been in an accumulation phase and in mid August we saw demand for this stock increase dramatically as price gapped up through the resistance on strong volume. The stock would run from the $4.30 area to $5.79 or an approximate increase of 35% in growth.
The up move was confirmed when the third leg failed to move with any force and we saw a shortening of the thrust. The resistance level from April 2011 was too strong and there was not enough demand to overcome the supply. The price has fallen strongly since then and the recent earnings news didn't help with several arms of the business struggling. We have seen a small rally as the price looks to close the gap after the gap down when the earnings report was issued. However the only way we will continue to move higher is if we see some consolidation and a cause built for higher prices at these levels followed by some strong demand.
The point and figure chart has been very useful in predicting levels the price may rise or fall too. If we look at the chart below, we were able to predict that price had enough cause built to reach to at least the $5.65 level. The stock was accumulated in May to August 2012 and when it broke out if we had of bought on the pullback to the $4.30 levels our target would have been the $5.65 region. Price had built enough cause to move $1.74 higher. The point and figure calculation is worked out by multiplying the number of columns the base of the accumulation is by the reversal amount (box size of 2c times 3 which is the reversal amount to start a new column), therefore 29 x 0.06 = $1.74.
If we look at the current situation when the stock was distributed in Feb to June 2013, we have two counts to work off which gives us a price range we may see some value for this stock. If we use the conservative count of 18 columns we are looking at $4.02 and the larger target of $3.48 (27 columns). Price fell to $4.16 after earnings in June and we have rallied since then, if this is just a pullback, price may well fall to $4.02 and beyond with the longer term target of $3.48 a possibility and a overall fall of 26% from todays close ($4.74). This would then look like a valuable investment at these prices.
Interestingly though if we look the weekly chart below, we are trading just above the underlying trend line that dates back to 2003. Price has been using this as support and we have already seen several bounces off it including the fall on earnings in June. If we take this into account if price was to fall to $3.48 it would mean breaking through this long term trend line and back to the area price fell during the GFC. The most important level looking forward if price does drift lower will be the re-test of the lows after earnings at $4.16, if there is some strong support there, $4.02 could indeed be the intended value. This is one to watch for sure, as this stock has been a lot higher in the past and only time will tell if new CEO Craig Meller can turn things around and bring back consumer confidence.
by Mathew McCullagh.
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