Charts promise life for Invocare

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Invocare is a consumer discretionary sector business that owns and operates funeral homes, cemeteries and crematoria. It has continuously traded on a high PE Ratio of between 18 and 31 over its 10 years of being listed on the ASX. Its PE Ratio is currently 26.9. It has continued to increase its dividend year after year and its earnings per share every year bar one, making it a great long-term prospect for a buy and hold portfolio.

But it’s the chart that looks interesting at the moment.

A dull run

After a run-up from $8.52, starting in January 2013, to a high close in May 2013 of $12.15, Invocare’s share price (IVC) has taken an eight-month breather and closed on Friday at $11.22.

Source: Beyond Charts

The near 50% increase in the Invocare share price to May 2013 then had a 61.8% Fibonacci retracement to around the $10.10 zone, which is shown on the chart with the blue horizontal rectangle. This zone has formed a strong support zone, which can be used as a stop loss area for a long-term position in Invocare.

Since May last year, the Invocare share price has been making lower highs as shown by the declining black trend line. The blue horizontal support zone and this descending black trend line, form a descending triangle, which is typically a bearish pattern.

A bright spot

However, Invocare may have enough going for it to resist the force of the bearish pattern. This includes its sound fundamentals, the 61.8% Fibonacci retracement support zone, primary bull market conditions that exist for equities at the moment and last, but not least, the breakout above the black descending triangle that occurred on Christmas Eve.

Following the Christmas Eve breakout, a 10-day period of indecision followed, where Invocare traded between $11.00 and $11.20, with this range finally broken on Friday 10th January, when another small breakout occurred, and it closed at $11.22.

Whether the pull of the bearish pattern turns this into a false breakout, or the strengths that Invocare has going for it take its price higher, will be known in the next two to three weeks. To confirm the breakout and continue rising, the share price must rise above $11.50. To confirm the false breakout, the share price must fall back into the range demarcated by the descending triangle.

If a position is taken at these price levels, a stop loss should be set just below $10.00 to protect a large move to the downside. However, the upside might be quite large, given Invocare’s price growth over the last 10 years and the current equities primary bull market conditions.

Gary Stone is the founder and Managing Director of Share Wealth Systems.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.


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