Limited Upside For AMP

This story features AMP LIMITED. For more info SHARE ANALYSIS: AMP

Bottom Line 23/08/13

Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Flat

Technical Discussion

AMP ((AMP)) is pretty much where we left it during our last review with price immediately breaking to the downside only to rally over the past couple of weeks.  In regard to our analysis nothing changes as we continue to expect the typical retracement zone to be tagged in the not too distant future.  And that target area is an integral part of the larger degree patterns making it a region to keep a very close eye on.  I’d need to see the 61.8% retracement level overcome before getting confident that the zone of resistance is going to be the next port of call though the stock needs to prove itself pretty much immediately.  On the flip side, it would take a break beneath the low of wave-b to move us to a more bearish stance though in reality I think the risk at the moment is to the upside, albeit over the short term.  This hasn’t been the best company to trade longer term as price action has been very choppy in nature from the March 2009 lows.  In other words it’s been range bound and until either the upper or lower boundaries are overcome we have to be cognizant that more of the same sideways chop is going to be the way forward.  To gain confidence that a longer term trend is going to develop we’d actually need to see $7.00 overcome which isn’t looking likely anytime soon. 

One of our focal points last time was on a possible pennant that appeared to be unfolding though it subsequently failed to evolve.  It could well be that another one is in the midst of developing though ideally it will take a few more days to conclude.  These types of patterns usually break in the direction of the prior trend which in this instance is up, albeit only over the short term.  Should the upper trend line be penetrated the 50.0% – 61.8% retracement level should be tagged sooner rather than later.  As already mentioned unless the upper boundary of the target is exceeded we have to be open to the possibility that further weakness is going to unfold a little later down the track.  The one aspect of the chart that we have liked over the past few reviews is the massive increase in volume which coincided with the late June lows.  A very good signal that the smart money was taking an interest which of course in hindsight has resulted in a decent show of resilience.  The rally should continue over the coming weeks before the make or break point is tested.

Trading Strategy

Nimble short term traders could buy following a break out of the pennant although just be cognizant to the possibility that rejection could be seen at the typical retracement zone which means the risk/reward isn’t overly enticing.  At the end of the day there are much stronger trending stocks out there than AMP at the moment which is enough reason for me personally to look elsewhere.  There will be swing trades available down the line though it’s difficult to envisage the stock embarking on a longer term sustainable trend with the information at hand.  We’ll keep it on the radar is it’s a popular stock though upside looks reasonably limited for now.
 

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