CGI Group Inc. tripped over its Q3 report

Aug 6th, 2010 – Comment

At this point I would say that you need GIB.A to build a base and consolidate before taking up a position. If you are already invested you might want to think about taking some profits.


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cgi

Lou,

The folks at CGI just won a management contract for California State. What is your opinion of their stock’s likely short term movements?

Amos

Hi Amos,

CGI Group Inc. (GIB.A TSX) has had a great run from the lows of March 2009 and was even been able to break through long term resistance that had been in place since 2007. But the advance got side swiped on the release of its Q3 results on July 27, 2010. The company reported falling revenue and a reduction in orders attributed to weakness in their European operations because of the sovereign debt crisis that started in Greece.

The retreat since the end of July has been very sudden and the question is where does GIB.A go from here.

 

GIB

The three year chart clearly illustrates the trend that supported the advance from $8.50 to the resistance at $16.60. GIB.A has pulled back close to 11% and is currently trading below its 50 and 200 day moving averages. The pull back hasn’t been overly aggressive but we really want to confirm the bottom on this move lower.

 

 

 

 

GIB2

The six month chart tells the tale of the not being able to breakthrough $16.60 and not being able to hold onto support at $15.00 after the report of the third quarter results. In May of 2010 both the MACD and RSI started to signal a shift in momentum to the downside and in July just before the Q3 report the MACD began to bend lower. You had to be fleet of foot to get off the ride in the two days of trading before the big drop.

 

At this point I would say that you need GIB.A to build a base and consolidate before taking up a position. If you are already invested you might want to think about taking some profits. The company has extended its $900M offer to buy Stanley Inc. to August 16, 2010. If they have to sweeten the offer it could put more downward pressure on the stock. Watch the MACD for signs that the selling momentum has abated before acting.

 

Happy Capitalism!

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