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There's likely more pain ahead for Performance Sports Group

Hi Lou,

Could you take a look at Performance Sports Group?




Hey Mike,

Thanks for the assignment. This will be the first time that I evaluate the patterns for Performance Sports Group Ltd. (PSG-T). The company produces equipment and apparel for ice and roller hockey, baseball, softball and lacrosse. SPG also has a line of soccer apparel. Some of the brands in the portfolio include Bauer, Easton, and Maverik.

In an effort to push their hockey brands in a high-profile retail environment, the company has opened a few outlets called Own The Moment. The company earns 42 per cent of its revenue from the United States, 24 per cent from Canada, and 34 per cent from the rest of the world. The problem with the business is that the U.S. dollar has been running higher, which crushed 58 per cent of sales volume on a foreign exchange basis.

A probe of the charts will inform my thoughts on this investment.

Desktop users click on image to enlarge

The three-year chart depicts a stock that enjoyed a sweet advance that started in August of 2011 near $5.50 but topped out at its 52-week high of $26.10 in May of 2015. The uptrend line was breached in June of 2015, as was support along the 50-day moving average. July saw PSG break below the 200-day moving average, and in August a death cross confirmed that investors could expect continued selling pressure. Keep in mind that for most of August, the shares were fetching close to $20 so there was ample opportunity to get off the ride and preserve capital.

Also evident is the resistance along the 50-day moving average and the series of lower highs and lower lows.

Desktop users click on image to enlarge

The six-month chart provides a close-up of the resistance along the 50-day moving average that has led to the 52-week low of $8.42. The MACD and the RSI both generated sell signals in early December of 2015 when the shares were trading above $15. The break below support at $13 in January of 2016 indicated that there was more pain in the offing.

If you are planning to bottom fish, wait for some signal of a trend reversal. That may come in time, but unfortunately not at this time.

In the analysis to follow I will examine the case for Summit Industrial Income REIT (SMU.UN-T) for Allan.

Make it a profitable day and happy capitalism!

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