Seek Looking For Upside

This story features SEEK LIMITED. For more info SHARE ANALYSIS: SEK

Bottom Line 05/05/15

Daily Trend: Neutral
Weekly Trend: Neutral
Monthly Trend: Neutral
Support levels: $15.17 / $11.76
Resistance levels: $18.99

Technical Discussion

Seek ((SEK)) runs an online employment business which now operates in 12 countries including Australia, New Zealand and Hong Kong to name just a few.  It functions in three sections; online employment classified advertising, running and executing training courses and investments in overseas online employment marketplaces.  The company provides online employment classified advertising via the SEEK website.  In 2014 it acquired a 25% stake in Bangladesh's online employment marketplace bdjobs.com.  The company was founded in Melbourne in 1997 and now employs over 6000 people working globally.  It has over 30 million monthly visits and accounts for around 70% of all online Jobs. For the six months ending the 31st of December 2014 revenues increased 17% to A$401.6M. Net income before extraordinary items increased from A$86.6M to A$182.8M. The dividend yield is 1.8%.  Broker/Analyst consensus is currently "Sell".

Reasons to be ready to buy:
? The 38% share in Babajob, an Indian online employment player provides long-term growth prospects.
? The JobStreet acquisition should be a major contributor to second half results.
? The growth story continues with the domestic market also looking brighter.
? Its affiliate Zhaopin in China recently reported robust quarterly results.
? SEEK Learning and Swinburne Online are performing strongly.

Looking at the weekly chart here shows why some analysts and brokers have been leaning toward a "sell" recommendation.  Price has basically meandered sideways for just over a year now with no decent trend in sight.  However, we see no reason to be bearish; in fact we are viewing the consolidation pattern as being extremely healthy in the bigger scheme of things.  What we have to take into account is the potency of the trend that kicked into gear in late 2011 with the end result being a gain of almost 290% to the recent pivot high.  This is exceptional whichever way you look at it.  It's also worth remembering that nothing goes up in a straight line indefinitely which again reiterates that the lacklustre price action of late is nothing out of the ordinary and could well set the stage for the next leg higher. 

The only problem with consolidation patterns like this is trying to determine when they are going to draw to a conclusion and right here and now there is no indication that the strong prior uptrend is about to reignite.  In fact it would come as no great surprise to head down to the recent pivot low around $15.00 though we'd fully expect buyers to reappear at those slightly lower levels.  Over the short term there is scope for a bounce which is due to Type-A bullish divergence being in position.  It also triggered today which as a minimum suggests the recent pivot low at $16.04 will not come under pressure until our oscillator rotates back up into the overbought position.  The best case scenario is that a decent rally unfolds though we can't get overly optimistic until we start to see some strong impulsive price action again.

Trading Strategy

As mentioned above we retain a bullish stance over the longer time frame though the time for jumping on isn't right here and now.  If you really do like the company you could accumulate partial positions in this region though I wouldn't go the full hog until the upper boundary of the congestion pattern is penetrated.  That means we need to see a close above $18.99 before being fully committed.  It would take a break beneath $15.17 to suggest a significant top is in position although it isn't our highest expectation to attain those lower levels.
 

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