'Flunk' signs creep up on polymer firm

By Graeme Dickson
Updated:

 

A number of key moving averages have acted against high performance polymer company Victrex (VCT) in recent weeks.

In fact the last time the 20 day exponential moving average (green line) went down through the 50 day exponential moving average (yellow line) was back in September 2008.

The recent intersection will be of significant interest to those who follow charts closely.

The company also trades on a very high multiple of 49 times historical earnings - albeit it is expected to fall to 17 times for the year ending 1 September 2010. The yield of 1.8 per cent will not attract many investors.

VCT graph

Having said that, the company is in strong financial position, with a healthy balance sheet and the markets its products serve are diversified. This includes the medical device market, transport, industrial engineering and electronics markets, so it is not without its attractions.

Thus this idea has a high risk of flunking, should investors start to gain confidence in the global economy.

The company is set to issue a trading statement on 7 October which will either be the catalyst for a confirmation of what the charts are signalling or possibly reverse the direction and re-test the year's high of 1320p. Look for initial support around 900p should the idea go our way.

Update

Carpetright – suggested to sell last week at 721.5p, yesterday it closed at 724.5p. So no significant change at this moment in time. Hold on for now but a close above 780p would negate this idea.

Stobart (STOB) – suggested to sell at 143p, the stock closed yesterday at 140p. Keep the stop at 150p whilst looking out for support at 120p.

Kingfisher (KGF) – suggested to sell at 211.6p, the stock closed Tuesday at 204.5p. Keep the stop at 212p, while seeking an initial target of 175p.

Autonomy (AU.) – suggested to sell at 1685p, the stock closed yesterday at 1560p. Keep the target and stop at 1500p and 1630p, respectively.

Smith & Nephew (SN.) – suggested to sell at 581.75p, the stock closed yesterday at 542p. Lower the stop to 573p.

Capita (CPI) – suggested to sell at 754.5p the shares closed yesterday at 703p. Keep the stop at 730p, although at some stage would hope to take profits in the 665/670p region.

The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Alpha Terminal.

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