The Trend Remains Pro Medicus’ Friend

This story features PRO MEDICUS LIMITED. For more info SHARE ANALYSIS: PME

Technical update on Pro Medicus ((PME)).

The Chartist reports shares in Pro Medicus are having a breather, with the uptrend likely to continue.

Bottom Line

15/1:

Daily Trend: Down

Weekly Trend: Up

Monthly Trend: Up

Support Levels:  $144.34 / $110.22 / $70.00 / $36.54

Resistance Levels: N/A  (All-time highs)

Technical Discussion

Reasons to be bullish:

-The company’s Visage 7 software holds significant value for its customers.

-Feedback to the above indicates Visage is around 65% faster than legacy PACS solutions.

-Recurring revenue streams and floor payments have between 5 to 8-year terms.

-Increased penetration of the US addressable market could be a tailwind.

-A healthy consolidation phase has been unfolding over the past few weeks.

We often say that nothing goes up in a straight line indefinitely, with every trend needing a retracement or at least a breather.

Since June 2022, PME here has been trying to prove that theory to be wrong. However, you will never see a chart that goes up indefinitely in a parabolic fashion.

That said, the consolidation phase that’s been unfolding since late November last year is merely a blip on this weekly chart.

At some juncture, there will be a deeper retracement, but there’s no indication that time is right here and now.

We would need to see more serious signs of distribution before thinking along those lines. One thing is for sure, there’s no reason to fight this trend.

Clarity begins from the March 2020 lows which is true of most stocks. It’s when the broader market started to recover from the Covid-induced sell-off.

From that low point, a symmetrical 5-wave move unfolded, completing wave-1 as annotated.

The zigzag that followed completed in the typical retracement zone meaning wave-2 was also textbook. That’s where the potent trend started to unfold. Apart from the odd breather, it’s been heading higher ever since.

In stocks we expect wave-3 to extend which means it needs to be at least 1.618 times the length of wave-1. That projection isn’t on this chart as we’ve already overcome the 2.618 projection.

There’s now no target area for wave-3, so we just need to go with the flow and see where it takes us.

Once it’s locked in, we’d expect to see a multi-month retracement, albeit it should be shallow in the bigger scheme of things. That’s something to consider further down the track, once the current trend runs its course.

The current consolidation phase likely comes on the back of Type-B bearish divergence on the daily chart (not shown).

Price recently made a double top whilst our oscillator made a lower low. It’s not the most potent type of divergence, but once again it’s proved to be influential.

Our oscillator is well on its way to the oversold position, albeit it could still take a week or two before it unwinds fully.

Once it does, the door will be open for the trend to continue north.

Trading Strategy

If you’ve been riding this stock higher over the past few years, you’ll be sitting pretty.

Unfortunately, we got stopped out of our long position in early August, as a short retracement tagged our protective stop.

A reasonable profit was the end result, albeit we’ve been watching the potent trend continue over the past few months.

That’s all part and parcel of trading though, as you’ll never get in or out at the exact higher low.

If you are keen here, you could buy following a break up through the recent pivot high at $271.27.

Place the protective stop beneath the lower boundary of the small trading range at $240.00.

It’s an aggressive low-risk entry which offers plenty of upside potential. With blue-sky ahead, use a trailing stop to manage the position. There is no formal recommendation.

www.thechartist.com.au

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).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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