DH Corporation getting pressured by short sellers

Nov 30th, 2015 – 3 Comments

Multi-year advance broke down in August of 2015


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DH LOGO

Hello Lou,

Could you please give me your analysis on DH Corporation.

Is it a good company to have in your holding.

It has not been performing well the past few months.

Does it have a good or troubled future?

Thanks,

Mario

 

Hey Mario,

Thanks for the assignment. This will be the second time that I inspect the charts for DH Corporation (DH TSX). The last was on December 5, 2011 when the shares were trading for $14.94. Morton wanted my opinion on a hold or sell decision he was considering. The survey indicated that the stock was trading in a down channel after having retreated from a 52-week high near $22.00.

With the evidence at hand it was suggested that the stock could be considered for a tax loss sale and a repurchase in the new year. Which turned out to be the right strategy. In early 2013 the shares started a multi-year advance that touched a 52-week high of $44.14 in late July of 2015.

In 2011 the company was known as Davis & Henderson Corp. and it was transitioning away from its core business of printing personal and business cheques for banks. In 2006 the core business represented 90% of revenue. By 201o management had worked that down to 46% with lending technology and servicing solutions making up 48%. Today DH has the cheque printing component down to 20% and their various financial technology offerings providing a new focus for the business.

An updated probe of the charts will form the basis of my analysis.

 

 

DH

The three-year chart provides a text book example of a long term advance coming to an end. The MACD and the RSI generated sell signals in early August of 2015 followed by a breach of the uptrend line later in the month. In September DH broke below the 50-day moving average and then the 200-day moving average in October. The death cross that formed later in October set the stage for aggressive selling that took the shares down to the 52-week low of $29.15.The selling pressure that surfaced in late October has been attributed to short sellers attacking the stock.

 

 

 

 

DH2

The six-month chart provides a close up the bearish patterns mentioned and the spike in volume that occurred as the shares fell in late October. The stock traded five to ten times its average daily volume as the short sellers borrowed shares and sold them for cash.

At this point you might want to keep your powder dry and see if the short sellers have moved on.

Next time I will examine the charts of BlackBerry (BB TSX) for Carl.

 

Make it profitable day and happy capitalism!!

 

 

 

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