Should You Expect More Downside For Equities That Touched 52-Week Lows?

  • Oct 30, 2018 AEDT
  • Team Kalkine
Should You Expect More Downside For Equities That Touched 52-Week Lows?

At current scenario, there are many factors playing a significant role in dragging equities to their 52-week lows. US equities after recording a period of strong growth and posting record bull rally is now saturating from those levels and coming down. Investors are chasing for other investment avenues and asset vehicles like cash and bonds. In Australia, uncertainty prevails across political set up and such uncertainty impacted the equity markets too. Most of the companies hitting 52-week lows were from the technology sector. In fact, most of the equities that showed sharp fall in their prices were either highly overvalued as per analyst estimates or the growing political uncertainty impacted the business of the company in some or the other way. However, the fall was not limited only to one sector, rather it was seen across almost all the sectors and industries with some highly overvalued scrips showing much downside as compared to others.  

At current juncture, there are almost 17 companies in the ASX200, that touched the 52-week lows lately. The fall was well noticed in SEEK (ASX: SEK) touching the levels of $17.48, Boral touching the lows of $5.3, Carsales.com touching levels of $11.93 and Caltex touching 52 week low of $27.15.

Technically, if we just analyze each scrip, the situation will be clearer. Technical charts of SEEK, indicate that at current juncture it is trading at the lower end of the bollinger, after touching the 52-week low at $17.48, the scrip took the support and currently trading at the levels of $18.25. RSI was already in oversold territory. Financially, the scrip is trading at high P/E of 119.14x and beta of 1.27x signals scrip hold to expensive valuation, along with negative quarter to quarter results for June 30, 2018 period. After touching the 52-week low of $17.48, the scrip is currently trading at the levels of $18.24.

Boral Limited (ASX:BLD) was trading at lower low levels with trading at the lower zone of the bollinger bands with major indicator like RSI in oversold territory and MACD in negative territory. Financially, the company has negative cash flow along with heavy amount of short term and long term debt, which impacted its growth on quarterly basis. With political uncertainty prevailing in the market, and lower than expected financials, there was no key factor to support the pull back for the scrip. After touching the 52 week low of $5.3, the scrip traded at the levels of $5.52.

Carsales.com is trading at the lower end of the bollinger bands, with major indicator like RSI in oversold territory, and MACD in negative territory. Financially, company has incurred high amount of short-term debt for the quarter impacting its debt/equity ratio. This supported the fall for the scrip that touched the 52-week low of $11.93. After touching the 52-week low of $11.93, the scrip is currently trading at the levels of $12.42.

Caltex (ASX: CTX) is trading at the lower zone of the bollinger bands with indicators like RSI in oversold zone, and MACD in negative territory. After touching the 52-week low of $27.15, the scrip is currently trading at the levels of $27.4.

Political concerns prevail in the markets and investors stay cautious with their investment in equities. 52-week lows should not be taken as a signal for start of fresh investment. Investors should clearly evaluate the financial performance and technical confirmation along with political sentiments to make any further investments in equities. On the other hand, stocks to the likes of Boral may see a rebound as factors such as infrastructure potential may take an upper hand when market stabilizes a bit.


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