How high can Altium go?

Disclaimer

This is a chart review, which takes no note of fundamental considerations, and seeks to provide readers with general information of a technical nature only. It should not be relied upon in making investment decisions.

I chose to review Altium after reading a post about the company in the Traders’ Community Website “Ten Bags Full”. I do not now  own Altium shares, but may do so some time in the future.

 

Background information

Altium Limited is an Australian based software company that provides PC-based electronics design software for engineers. Founded in 1985, Altium has headquarters in Sydney and sales offices in the United States, Europe, Japan, China, and resellers in all other major markets.(Wiikipedia)

Australian electronics designer Nicholas Martin has been researching the design and production of printed circuit boards using personal computers over a period of three decades.

After floating on the ASX in 1999, it has grown with acquisitions, and has developed its own platform called “Designer Explorer”.

Short-term outlook for Altium

This is a daily chart which incorporates Daryl Guppy’s Multiple Moving Averages (MMA) to show the most recent changes in the stock-price.

Change of trend with impulsive move higher.

Change of trend with impulsive move higher.

TA considerations

  • The MMA  trace shows that during March and April of this year the share-price was trending lower to a low of about $2.
  • The momentum of the decline flattened in May, and on the 11th June an impulsive move higher emerged.
  • Since then 7 of 8 candlesticks have been trending upwards strongly. A single candlestick formed a Doji,reflecting a day of indecisive trading.
  • The short-term moving averages, after converging, started to cross-over on the 16th June. and to rise strongly, crossing also into the longer-term moving averages of investors. The last  candle-stick showed that the share-price reached a high of $2.46.

 

Long-term picture

This is a monthly chart covering the 15 years since being listed on the Australian Stock Exchange.

Recent stock-price movements are best considered in the context of the overall “big-picture”

 

A continuing phoenix-like recovery?

A continuing phoenix-like recovery?

TA observations

  • From a listing price at about $2, the share price lifted to a high of about $6 in February 2000.
  • It is not easy to keep up investor enthusiasm for a stock that takes years to develop and market its products. Somewhat predictably the share-price continued to weaken, reaching a low of 8.5 cents in June 2011.
  • Since then a slow but steady rally lifted the share price to a high of $2.90 in August 2013, handsomely rewarding those investors who were brave enough to enter when the stock was in the doldrums.
  • Further recovery stalled, unable to break above $3 resistance, and instead entered a trading range forming a flag pattern.
  • The recent surge in the share price seen on the daily chart looks to have enough momentum to break-out from the trading range and to retest the $3 resistance level.
  • The RSI on the monthly chart has been in the over-bought zone since 2012, warning of a possible corrective move lower back towards the mean.

Conclusions

The first hurdle to be met is the resistance at the upper level of the trading range (about $2.50).

The momentum of the current impulsive move appears sufficiently strong to continue and to achieve this based on the the strong upward movement and increasing divergence of the short-term averages.

Even the longer term averages are now turning upwards, but have not yet started to cross-over. This suggest ongoing buying activity, spreading into the longer-term investor sector.

Possible strategy for a long investment position

It is not clear whether this current impulsive move higher is just due to short-term traders and speculators who are likely to soon exit.

A sequence of cross-overs of the longer-term averages could provide confirmation that the uptrend is backed by investors, and therefore likely to continue.

Reasonable entry points could be break-out above trading range resistance at $2.50, or penetrating the resistance of the last high at $2.90.

One would then be looking at targets suggested by Fibonacci extension levels at $3.50. $4 and $4.25.

Stop loss positions could be at $2 or $2.50 respectively according to the entry point. Stop loss positions should be trailing stops, and could then be based on an appropriate moving average trace.

 

 

 

 

 

 

 



Categories: Chart Analyses, Technical Analysis, Trading opinion

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