Aecon Group Inc needs to retest $10

Jun 21st, 2010 – 1 Comment

The best case scenario for ARE is that it retests support at $10.00 and then makes a move to regain some traction to the upside.


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aecon

Lou,
Can you provide a little insight into Aecon. ARE.TO
Lots of back log work and I understand that the money will be booked later.Period of seasonal strength I believe starts in the fall but come on a $340 million contract to stop the drop ??
Must be more to it.

Regards,and recently new to your site so thanks for all offered.

Rob

 

Hi Rob,

I agree Aecon Group Inc. ( ARE TSX) didn’t make the turn on the announcement of a $340M contract which represents their 20% interest in the joint venture awarded a $1.7B contact by Ontario Power Generation on June the 8th 2010. It had much more to do with the stock hitting a support level that triggered technical buying.

Some investors have questioned my use of technical analysis as the basis for decision making. A few have likened it to astrology to which I say,” if you have an astrological system that helps you reduce risk and make profits lets have a look! “. Another thing to keep in mind is that more money trades on technical parameters than on fundamental analysis.

Don’t let the story obscure the trend.  If you look at the analyst ratings on ARE there are no sell recommendations that I could find, only buy and hold. I’m not sure if that’s astrology but it does make me wonder, how do those stars line up?

 

 

are

The three year chart illustrates a great double tap off a rock hard bottom in late October and November of 2008. A double bottom is a reversal pattern that usually signals a move to the upside.

As with most things, even a great ride can’t last forever with ARE topping out in late 2009. The trend line that supported the advance has been breached and the stock is now trading below its 50 and 200 day moving averages.

What you can see is that the stock caught a bounce off of $10.00 where it has some support. That’s the technical buying I was referring to earlier. The RSI indicated that the stock was oversold and that it was likely that traders would pick up on the signal and start buying. The MACD also indicated that the selling momentum was dissipating.

are2

The six month chart provides a closeup of the recent action. There is lots of resistance to the upside currently at $11.50. There has also been resistance all along the 50 day moving average since the beginning of 2010 with a death cross forming in May.

The best case scenario for ARE is that it retests support at $10.00 and then makes a move to regain some traction to the upside.

Happy Capitalism!

 

 

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