Hi Lou,
Enjoy your column, could you give me your opinion on Exco Technologies?
Thanks,
John
Hey John,
Thanks for your kind words and the assignment. Exco Technologies Limited (XTC) operates globally with facilities in ten countries. The company designs and manufactures a wide range of products to the die cast, extrusion, and automotive industries. Casting and extrusion make up 62 per cent of sales with automotive responsible for the remainder. The shares have rewarded investors with significant gains since January of 2012. Revenue and earnings growth over the same time period have been robust and helped drive the stock to record highs in 2014.
An examination of the charts will inform my opinion of XTC.
The three-year chart provides a text book example of a stock producing a steady profit-generating advance. The shares started the long-term uptrend in January of 2012 with a golden cross forming in late February of the same year. The shares ran to resistance at $5.00 by late April then and built a base at $4.50 until November, when another move higher began. Over the course of the last 31 months the uptrend line has remained intact and there have been repeated tests of support along the 50-day moving average. In addition, there has been a series of base-building steps along the way providing support as the shares progressed.
When you inspect the MACD and the RSI over the last sixty days there were clear signs that the shares were getting overbought and that there would likely be a pullback from the all time highs. That is exactly what transpired.
The momentum indicators on the six-month chart generated a buy signal in mid May as the stock broke above resistance at $9.00 in April. The move to $12.50 by early June was perhaps a case of going too far, too fast and resulted in profit-taking that drove the shares back to $10.50 by mid-July. What is evident on the chart is that the next challenge for XTC will be moving through resistance at $11.50.
The best-case scenario at this point would be if the stock reverted to its pattern of building a base at these levels to support a new leg up. The next flex point will the be the release of fourth-quarter results in November. XTC offers a dividend that yields 1.77 per cent which won't pay all the bills, just some of them.
Make it a profitable day and happy capitalism!