Venture approaches bear territory! Should we sell? (24 Apr 18)

Dear all,

Venture has entered into bear territory after dropping 21% from an intraday high of $29.65 on 13 Apr 2018 to close $23.40 on 24 Apr 2018. What should we do?

Let’s examine the chart and some noteworthy points on Venture.

 

Chart analysis

Based on Chart 1 below, Venture’s chart seems to resemble a bearish double top formation. The break below its neckline $26.95 points to an eventual technical measured target $24.60 which is already attained today. 20D, 50D and 100D exponential moving averages (“EMA”) have started to turn lower amid the sharp drop. Venture closed below its 100D EMA, its first since 1 July 2016. ADX closed at 22.1, indicative of a mild trend. Indicators such as MACD and RSI are oversold with RSI closing at 28.3. Since 8 May 2015, there has been only one occasion where the RSI is lower than now. In other words, on a relative basis, Venture is pretty oversold. It is noteworthy that despite the plunge, 20D EMA has not formed a death cross with 50D EMA.

As oversold pressures escalate, it is likely that Venture may not drop too drastically in the near term (Caveat: do note some of the noteworthy points below which may adversely affect Venture). A sustained break below 200D EMA (currently around $21.55) is very bearish. A sustained break above $28.60 alleviates the bearish feel of the chart to some extent.

Near term supports: $23.08 – 23.18 / 22.25 / 21.55 / 21.43

Near term resistances: $23.88 / 24.56 / 24.77 / 25.33

Chart 1: Venture’s 21% plunge, mainly in the past three trading days

Venture chart 24 Apr 18

Source: InvestingNote 24 Apr 2018

 

Noteworthy points

1. Ex-div $0.60 / share on 17 May 2018

Venture is going to go ex-dividend on 17 May 2018 with a dividend per share of $0.60. At the closing price of $23.40 today, this represents a dividend yield of 2.6%. Most analysts believe that Venture is able to maintain such dividends in the foreseeable future.

2. Analysts are still bullish on Venture

Based on Figure 1 below, analysts are positive on Venture with a minimum target price of $30.50. Average analyst target price stands at $31.81. However, I wish to caveat that

a) There are only two rated reports post Philip Morris IQOS and Oclaro/ZTE impact. CIMB estimates that Philip Morris IQOS and Oclaro/ZTE may contribute between 7-10% of Venture’s revenue. However, there is insufficient information for them to reduce their target price now (Readers can click the link HERE for Venture’s analyst reports);

b) Venture reports results tomorrow. Analysts may tweak their target prices post the results.

Figure 1: Average analyst target stands at $31.81

Venture anr 24 Apr 18

Source: Bloomberg 24 Apr 2018

3. An event risk à Results on 25 Apr 2018

Venture reports results tomorrow. This is a significant event as it is highly likely to have an impact on the share price. A better than expected set of results and outlook is likely to have a positive impact on the share price and vice versa.

4. Trade tensions between U.S. and China escalate

If the trade tensions between U.S. and China escalate, this may have an adverse impact on Venture’s customers which will subsequently impact its results.

 

Conclusion

This write-up summarises Venture’s chart outlook and some of the noteworthy points which readers should be aware. However, to be very clear, the above list of noteworthy points is not exhaustive. Furthermore, I am not extremely familiar with Venture’s fundamentals. Thus, readers who are keen to know more about Venture can take a look at this website (click HERE) for the analyst reports and do their own due diligence.

In a nutshell, Venture’s chart looks interesting as oversold pressures escalate and the recent share price plunge seems excessive as highlighted by the analyst reports.

 

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P.S: I am vested (long position). Do note that as I am a full time remisier, I can change my trading plan fast to capitalize on the markets’ movements.

 

Disclaimer

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