Plus500 (PLUS): Is the buyback enough? #PLUS

Although in most areas there is a fierce battle over whether the EU is a good thing or not, in at least one particular space, the ESMA rules regarding spreadbetting and retail “gamblers” has to be regarded as something the City of London really did not need. Not that anyone would dare say this openly. As far as today’s update from Plus500 is concerned, the obvious effect of halved profits would appear to be an obvious knock on effect of last August’s new trading rules. But what is interesting is the way the group appears to have bounced back, adding 19% more customers during 2019. This is clearly impressive and suggests that the company is able to offer more than some of its competitors.

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Nevertheless, unless volatility in the markets rises – which going into Brexit / Trade War escalation it could, Plus500 remains a tricky trade share price wise. The jump we have seen today may have been as much to do with the promised share buyback of up to $50m, something which should scare off all but the most ardent of its shorters. What we have seen so far today is a fill of the April gap to the downside at 695p, with the high of the day at 697p. This zone is still technically the area to short the stock up to. However, a break of 700p could target the area up to the 200 day moving average currently at 941p. Therefore, in Plus500 we have a trading opportunity as intriguing as the company itself.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Chart of the Day: Kier Group (KIE)

Kier Group at 116p:

It is already quite clear that some in the market had thought, and perhaps still do, that construction and services company could be in the same groove as say, Carillion, or currently – Thomas Cook in the travel sector.

However, some more savvy players believe that Kier Group has enough family silver to sell to stay afloat and / or could be about to unveil a descent rescue package. Whatever this kind of vague speculation may lead to, for the purposes of Chart of the Day we have a stock which has become increasingly interestingly in recent days and weeks.

For instance, the final low in July to 58p was accompanied by bullish divergence in the RSI window suggesting that a turnaround could be afoot.

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But the latest breakthrough for the stock is through the 50 day moving average now at 105p – the same level as the mid June support on the way down.

What we can now look forward to is to say that while there is no end of day close back below 105p the potential upside here may be as great as the top of the rising trend channel drawn from June on the daily chart. The timeframe on such a move is regarded as the next 1-2 months.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Chart of the Day: Burford Capital (BUR)

Of course, one would not want to dignify the rumours going on around Twitter and other stock market gossip forums on Tuesday. But it would appear that it may finally be time for the bears to give Burford Capital something of a kicking, and perhaps even more than many investors who have been happy to buy on dips have become used to.

One of the rules of the stock market is that the stronger the trend, the rougher the ride, something that Fevertree (FEVR) shareholders have had to get used to of late. However, another rule suggests that the most resilient bull runs tend to end in the most dramatic of ways. The latter is what we may be seeing at Burford. Perhaps the best case scenario at this stage is that there will be a minimum test of support from the beginning of last year at 1,000p and then the stock will rebound back to at least 1,300p former neckline support. After that we could be back in a 1,300p – 1,800p range of the type which has dominated over the past year.

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Unfortunately, the worst case scenario would suggest that there could be a 700p decline from the 1,300p neckline break. This implies a target as low as 600p.

That said, an end of day close for Wednesday below 1,000p would risk 600p if only because the stock is trading in the aftermath of a May dead cross between the 50 day and 200 day moving averages. The longer we stay below 1,300p the greater the 600p risk becomes.

Del Taco: The #BeyondMeat Effect $TACO $BYND

There is little doubt that one of the stocks that has really captured the imagination so far this year is Beyond Meat (BYND). At the same time there has been something of a Beyond Meat effect, with a read across / proxies to the phenomenon scattered through the food space. A company which felt the influence of meat alternative giant is Del Taco Restaurants (TACO), given the way that it added vegan and vegetarian options to its menu, with commentators noting the way that even die hard meat eaters get a “flexitarian” urge now and again when new alternatives are presented to them.

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What has been disappointing though so far, is that even with the Beyond Meat inspired boost, same store sales at Del Taco’s restaurants were only up 2.2% as opposed to the 2.7% expected. This caused the stock to fall earlier this week. But it may be that the market has been too harsh on Del Taco. It could very much be argued that it is still relatively early for the alternative meat space, and Del Taco’s offering as well. It is also the case that shares of Del Taco are still appreciably up on the start of 2019.

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The shares gapped higher in June and on this week’s pullback have found support in the $11.50 region. There is also a rising trend channel which can be drawn from March off whose floor the stock has bounced twice this week. The likelihood is that at least while above the 200 day moving average still rising at $10.89 the stock will be able to revisit the best levels of the year towards $14 over the next 1-2 months.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Alexion: More Imminent Than Intereconomia Have Suggested? $ALXN

Earlier this week Spanish business publication Intereconomia suggested that either Roche or Amgen could be interested in Alexion, which has just unveiled its results. However, some sources have suggested that the timeframe on anything happening here could be rather more immediate than the few months initially implied – perhaps even as soon as in days.

That said, so far shares of Alexion appear to be content to test for support, even though, firstly its rare diseases space is one of strong growth, and after offering an impressive update on its Soliris treatment today. Presumably, now that the results are out of the way any would be bidder has the road clear to act if they so wish.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Overstock.com: In The Breakout Zone $OSTK

One of the more irksome aspects of the markets is when a stock or market is near to breaking out, everyone is waiting for a level to be cleared, and then there is a dance around resistance for an extended period. We are not quite yet in this kind of game playing yet, but shares of Overstock.com have poked just above the psychological $20 level a couple of times in the recent past.

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Looking at the daily chart and it can be seen how there has already been a clearance of the all important 200 day moving average at $16.69, so that really the bulls are allegedly relatively safe while this holds. However, a weekly close today should really be enough to begin an acceleration to the upside, with the best case scenario a possible move as high as the top of a broadening December triangle formation currently pointing to a target at $34 on a three months timeframe perspective.

Alexion: Another Pharma In The Spotlight $ALXN

As expected, the pharma area has been one of the strongest areas of the stock market for 2019, and as the biotechnology behind these firms feels like it is advancing 5 years every year, one would expect this to continue to be the case for quite some time.

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The stock of the moment comes in the form of Alexion Pharma which yesterday unveiled a consensus beating Q2 update, and raised guidance for 2019. To add to the excitement though, we have Spanish publication Intereconomia suggesting that Roche and Amgen are the two favoured contenders to takeover Alexion over the next few months, in a deal that involves Bank of America- Merrill Lynch.

The good thing about this situation, as is very often in the best stock setups, is the way that with the fundamentals of the alleged target company set fair – earnings per share up by over a quarter, even with an extended wait or no deal at all, Alexion represents a company which is unlikely to disappoint the bulls.

Looking at the charting situation, we see the shares sandwiched between a January uptrend line at $116 and the 50 day moving average at just under $124. The expectation would be for a break above the 50 day line next – with cautious traders waiting for this feature to be broken before targeting a retest of April $140 peaks.

Dogs Revived: #DRX #ITV #MKS

The usual rule with perennial underperformers is to leave well alone. It is almost impossible to call the bottom, and even if you do, the process can take so long as to barely be worthwhile. However, at least in the short term it could be that “Dogs” Drax, ITV and Marks & Spencer could be due a share price revival. What should be remembered however, is that from a fundamental perspective all three stocks are in sectors in “long goodbye” mode, with only the remote hope of a takeover when their stock price becomes so cheap delivering the possibility of putting these companies out of their misery.

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In the case of Drax, the market yesterday appeared to take cheer in the rise in quarterly earnings, and in the aftermath of the Iberdrola deal. The question is whether all of this will end the extended decline in the shares so far this year.  Bulls will take heart from the gap higher through the 50 day moving average at 290p. Such gap signals are usually very reliable and at least while above the 50 day line we can look to an intermediate rally towards the January resistance line at 340p.

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It is a sad indictment of the ongoing decline of the space which broadcaster has created for itself, that despite blockbusters such as Downton Abbey, and the even more mannered Love Island, the share price of ITV has continued to decline. But like Drax described above, we have been treated to a chart gap higher through the 50 day moving average, in this case at 109p. While above this feature a push back towards the 120p’s is expected, possibly as high as the zone of the 200 day moving average at 129p over the next 1-2 months.

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It would be entirely disappointing if the £1m M&S has paid to the irksome Holly Willoughy was actually paying off as far as its summer range. One would hope that there are other factors at play as far as the falling wedge break higher on the daily chart. Whatever the case may be a continued rebound to the 50 day moving average at 220p would appear to be the minimum on the upside, with the possibility while above the 203p July floor we see a move to the June peak at 232p over the next month.

Disclaimer

Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is  recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Whitbread: A Little Too Flash? #WTB

It is not often that the newspapers offer what appears to be a slam dunk story regarding a stock or a market, or in fact, anything else. However, The Telegraph’s Hedge Funds Take A £1.5bn Bet Against Premier Inn Owner Whitbread does seem to fit the bill at first glance. After all, who would want to bet against a “Flash Boys” hedge fund, as well as RBC and Short Capital warning against the share price falling below the £50 share buyback level. When you add in Elliott reducing its stake to below 5%, and it would appear only a masochist would remain long, and only a coward would not go short.

Perhaps the most interesting point here is the way that The Telegraph has published such a punchy story, and one that is all stacked up for traders – maybe too stacked up? The other point to note is the way that until Saturday’s article Whitbread shares appeared ultra strong, as has its fundamental history for much of the past few years. This culminated in the group flogging Costa Coffee to Coca Cola for £3.9bn – arguably ahead of the Peak Coffee we have hit in 2019. For instance, it appears Starbucks is dying on the vine in parts of the UK.

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Therefore, as is sometimes the case it may be worth letting the chart be the arbitrator of possible action. The stock has been very loyal to an uptrend line from April last year on the daily chart at 4,600p – just below the present share price. But it may be wise to wait and see if this level is clearly and cleanly broken over the next few days before assuming that we have not been treated to a bear trap.

 

 

 

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Chart of the Day: Kraft Heinz Holding Above $30 $KHC

While there may not have quite been 57 varieties of disaster as far as 3G and Warren Buffett’s experience with Kraft Heinz, the actual number may not be that far off. Clearly, schadenfreude  plays a part for some observers of this situation. But perhaps the key issue here is how is this situation going to play out?

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The answer may be that given the way that fundamental investors simply regard a cheaper share price as offering more value than an expensive one, doubling down here at $30 (or lower) may take away the pain of having overpaid by a significant amount. Given the shadow of the SEC, and the possibility of even more write downs, this situation appears fluid to put it politely. The final issue for Buffett / 3G is that Kraft Heinz’s woes are so substantial, being “back seat driver” shareholders may simply not be enough to stem the spiral of decline.

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But in one way, it is not the fundamental position currently which is of most interest. The daily chart showed what appeared to be a gap down overshoot move below $30 in May, and then gapped back up in June. This set up is called an Island Reversal and is ironically one of the strongest technical formations. A break of the February resistance line at $31.50 would back the idea that a technical rally is on its way. But at least while Kraft Heinz remains above the June $28.95 gap floor, we can regard this stock as an unlikely recovery situation for a move back towards the 200 day moving average now near $40 on a 3-4 months timeframe.