Macquarie Group Uptrend Intact

This story features MACQUARIE GROUP LIMITED. For more info SHARE ANALYSIS: MQG

The Bottom Line 24/06/15

DailyTrend: Up
Weekly Trend: Up
Monthly Trend: Up
Support levels: $77.41 / $74.60
Resistance levels: $84.19 / $97.00

Technical Discussion

Macquarie Group ((MQG)) is a leading provider of banking, financial, advisory, investment and funds management services.  It operates as a non-operating holding company (NOHC).  The company’s products and services include asset and wealth management which is engaged in the distribution and manufacture of funds management products. In June 2014 Charter Hall Group announced that Macquarie was no longer the substantial holder of the Company. For the six months ending the 30th of September 2014 interest income increased 7% to A$2.4B. Net interest income after loan loss provision increased 12% to A$878M. Net income applicable to shareholders increased 36% to A$630M. Net interest income after loan loss provision reflects an increase in interest earning assets and a decrease in interest bearing liabilities.  Broker / Analyst consensus is currently “Hold”.  The dividend is presently 3.3%.
 
Reasons to remain bullish longer term:
? The recent acquisition of an aircraft leasing portfolio is positive for future earnings.
? The trading range has been penetrated.
? FY 15 guidance has been revised higher.
? Almost 30.0% growth in advisory revenues is anticipated in the first half.
? Capital market trends are improving and figures suggests MQG is set for its strongest half in three years.
? Recent results were robust helped by favourable conditions in energy markets.
? The pay-out ratio over the past five years has been at or above guidance.

We took a look at the weekly chart during our last review of MQG which revealed that we were in a position to have seen a significant top.  This came on the back of seeing a symmetrical looking 5-wave movement higher that commenced all the way back in 2011.  However, the lack of downside momentum over the past few weeks means the prior uptrend remains firmly intact.  If a major top was in position we’d expect to see an initial strong thrust lower which clearly hasn’t been the case.  In fact a sideways meander has transpired which has taken the form of a symmetrical triangle with price recently breaking through the upper boundary of the structure. 

Going back to the weekly chart for a moment (not shown) shows that the 1.618 projection of the move higher that commenced in 2009 sits just above $89.00 making it a logical target area.  This now opens the door for a decent trend to kick into gear over the coming weeks.  Signs of rejection around the aforementioned target zone would portend a multi-month corrective phase although that’s something to take a closer look at much further down the track.  All we need to know for the moment is that buyers continue to support the company which means the bullish case is still alive and well for the foreseeable future.  This does fly in the face of our expectations during the last review but just emphasises why we need to take a look at the smaller degree patterns when the larger degree structures become a little hazy.

Trading Strategy

The best time to have jumped on was yesterday as price broke through the upper boundary of the symmetrical triangle.  However, there is still scope to initiate long positions right here and now with the risk/reward steel being acceptable if the triangle target is achieved.  With these types of patterns price should not head beneath the apex of the triangle meaning a push beneath $80.00 would raise a red flag over the short term.  With this in mind the initial stop should be placed at $79.90 with a view to tightening the trailing stop once the initial target is tagged. However there is a good chance that the slightly higher target around $92.00 will be tagged.

 

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