Cup and Handle Precedes Eagle Cement’s 31% Rally
Despite a dismal 60.50% slide in net income to only Php1.32 billion in the first six months of 2020 from Php3.33 billion in the same period in 2019, Eagle Cement Corporation still managed to stage a turnaround with its shares rallying by roughly 46% inside just 4 weeks. Of course, news that the government has allowed construction activities to resume in GCQ areas and that the construction of San Miguel’s new Bulacan airport project will soon commence have stoked interest in the shares of SMC’s ‘sister’ company.
From a technical perspective, one can see that the stock’s ongoing bull run was actually preceded by a very notable bullish reversal in the form of a cup and handle pattern. We should note that along the pattern’s handle, there was actually a market cross amounting to roughly Php600 million worth of shares at ~Php10.00 per share. This indicated that a relatively big investor had bravely entered into the company despite the said decline in 1H20 earnings. Presently, however, profit taking activities may lead the stock to at least tighten or pull back especially since it is already trading at a premium over its 12-month consensus fundamental target of only Php11.98 (also trading at a premium versus its best estimate among major investment houses of Php14.30). Nonetheless, the stock may eventually extend its ascent given its current trend and the absence of a bearish reversal. Note that the stock’s next resistance can be found at the top end of its 2017-2019 range of Php16.00 to Php16.40.
EAGLE write-up from the Trading Edge Equity Advisor:
August 26, 2020
Eagle Cement Corporation (EAGLE) may have just entered the early stages of a new bull leg. As you can see from its chart, the stock has just broken out from what looks to be a cup and handle pattern. Check that the stock has likewise broken above its key 200-day MA. Given this, the stock may then reach for its next resistance at its prior support of Php14.00.
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*Consensus target price or average target price given by the major foreign and local brokers of various stocks on top of index names are available in our Equity Advisor!
