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ATS Automation Tooling Systems (Handout)
ATS Automation Tooling Systems (Handout)

Schizas’ Mailbag

Watch ATS for signs of momentum Add to ...

Hi Lou

Been enjoying your refreshing column for some time. It is nice to see someone saying “don’t buy this or that” for a change. An antidote to ‘irrational exuberance’ of which we are all guilty at times.

I wonder what you think of ATS’s prospects particularly in light of its very choppy and hard to interpret chart over the last year with a number of steep corrections? Is rational exuberance warranted in this case?

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Jim

Hey Jim,

Thanks for the assignment and your kind words.

You are absolutely correct with regards to irrational exuberance. I have been guilty of getting married to a story, getting jug headed, and paying the price for losing sight of the trend. ATS Automation Tooling Systems Inc. has gone through the process of discontinuing its solar operations and focusing on the core business of their Automation Systems Group. When ATS reported their third-quarter results for the period ending Dec. 30, 2012, more than 80 per cent of revenues came from servicing clients in transportation and health sciences. With such dependency on these two sectors the company needs to see macroeconomic growth to drive demand for their services.

A review of the charts will add more depth to the evaluation of risk and reward when it comes to this investment.

The three-year chart indicates that the stock spent most of 2012 trading in a range with support at $8.00 and resistance at $9.50. In 2013 the stock has broken above $9.50 and is now hitting resistance at $10.00. If ATS can break above $10.00 it can run to $12.75 without much to hold it back.

The six-month chart illustrates the resistance at $10.00 that has surfaced in 2013. The MACD and the RSI are not indicating a move through resistance at this time. The best way to approach ATS is to be patient and wait for a better sense of continued momentum to the upside. Also keep an eye on volume which has been thin over the last thirty days of trading with only five sessions where volume was above the three month average. Advances on thin volume can prove a headache if you are the last buyer in the store.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

 

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