Splitit Payments Ltd (ASX: SPT) is one such stock that has been lately on the radar of almost everyone since its listing. The company is providing credit based banking solutions across 27 countries including Australia. It has not even completed its two months of listing on the ASX (listed on 29th January 2019), yet the stock kept on making the headlines almost every day. These headlines were primarily due to the magnificent gains the investors got since the first day of the listing when the stock touched the level at A$0.3 compared to the issue price of A$0.2. But this was just the trailer, the real action was yet to start. After the listing, the demand for the stock grew at an exponential rate which took the price to A$0.99 (at the peak as of 07 February 2019). At this point, investors already garnered a massive return of 161% from the listing price and an astonishing return from issue price.
After rallying quite intensively within a short duration, the stock started to consolidate in a converging range and touched the levels of A$0.75 – A$0.70. In a broader view, the stock had formed a clear “Bullish Pennant Pattern” with a breakout achieved around 28 February 2019. With the breakout, the stock was trading around A$0.87 (trend covered under another article wherein we have discussed every short term price development in detail, also giving the bullish view for the price levels). As expected, the prices rallied in one go to these levels.
On 11th March 2019, we again dived deeper into the stock, but this time fundamental analysis was viewed. Till this date, the prices rallied to A$2 but closed the day significantly lower at A$1.61. From this point, the business started looking overvalued. Fast forward two days, the stock was down by more than 19%. This fall was also on account of some major concerns that were raised by ASX over the price manipulation, to which the company responded that they are not involved in any malpractice, and the price rally is on account of media coverage. Whatever may be the reason, overvaluation around A$1.5 – A$1.6 or ASX’s price concerns around these levels, the net result was that the stock plunged quite heavily from the top. However, as at March 15, 2019, the prices recovered by about 6.7%.
Now, what to expect?
Interestingly the volume on the stock had remained little high all this while till end of February 2019. To put it in perspective, the average volume of the past 20 days was however, not even above 11 million against the earlier levels. This volume that took the prices 19% down from the top was the first indication of strong hands getting out of the stock. On the daily chart, the stock looked relatively weak and may retrace back to its major support level. After a plunge like this, generally a minor upside rally is typically seen, but traders should be careful about these trends.
SPT Daily Chart with Price and Momentum (Source: Thomson Reuters)
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