Perpetual: Closing The Gap

This story features PERPETUAL LIMITED. For more info SHARE ANALYSIS: PPT

On Friday, The Chartist expressed a cautiously positive tone regarding price action in Perpetual ((PPT)) shares.

Bottom Line

31/1:

Daily Trend: Up

Weekly Trend: Up

Monthly Trend: Up

Support levels: $17.84

Resistance levels: $27.41 / $34.33

Calendar Events:

Report Date: February 20 2025    Ex-Div Date: March 12 2025

Technical Discussion

Reasons to be cautious:

? More details on the cost-out program from the incoming CEO is expected.

? Foreign exchange has provided a helping hand.

? There are ongoing revenue pressures in asset management.

? There is still uncertainty regarding KKR with the proposed sale.

? Pushing away from the upper boundary of the zone of support.

It’s been a positive few weeks for PPT, with buyers returning around the upper boundary of the zone of support. It’s nothing we haven’t seen before, so we can’t get overly excited yet.

Still, it’s a small step in the right direction which is all we can ask for. A quick look at the monthly chart (not shown) provides a stark reminder of how this company has performed since mid-2017.

Back then it was sitting up around $56.50, with the retracement that followed resulting in a decline of almost -70%. That number increases substantially from the all-time high made in 2007 when it was sitting near $80.00. Suffice it to say, it is a company that has suffered severe technical damage. Although that keeps our feet firmly on the ground, it doesn’t mean to say it’s a company to avoid from a trading perspective. Even within a larger bounce only there could be a large percentage gain to be had. More on that below.

An announcement prior to our last review resulted in a large gap to the downside and a hefty decline. As we often state, we can never read too much into one day’s price action, as it’s what follows that is more important.

The good news is that weakness was short-lived. Buyers stepped up immediately resulting in a sideways meander. An impulsive leg higher kicked in around three weeks ago which has started to get the smaller degree patterns back on track.

It is early days in the bigger scheme of things, but the worst-case scenario has been avoided for the time being. It would take a break beneath the minor pivot low at $19.51 to suggest something more sinister is going to unfold. Indeed, if that line in the sand is overcome, the major lows made in September last year at $17.84 come back into play. That isn’t our highest expectation at this time.

The head & shoulders reversal pattern remains front and centre. It’s also a pattern that could potentially prove to be a turning point. The break through the neckline was strong, albeit the news-driven gap as annotated resulted in a retest of the breakout area.

The big positive is that diagonal support intersected the horizontal variety which usually proves to be significant. It was in this instance, with buyers stepping up right on cue. I haven’t put forward the H&S target, as the zone of resistance sitting on either side of $27.00 is likely to be more influential. In a perfect world, the current trend will continue bringing those higher levels closer.

Trading Strategy

Today’s weakness has resulted in price coming back to fill the gap that was left a few days ago. It provides an opportunity for the aggressive trader. You could buy following a push above yesterday’s high at $22.00. Place the protective stop just below Monday’s low at $20.70. Use a trailing stop to manage the position. I’m not going to make a formal recommendation but today’s rejection following the gap fill provides a setup if you want to follow it.

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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