Online job-ads group SEEK has been one of the more spectacular winners in the massive refashioning of the media sector wrought by the internet. Much of the employment advertising formerly carried by newspapers has migrated to SEEK, and its shareholders are being rewarded accordingly.
This week's chart, produced by Paul Ash, Victorian president of the Australian Technical Analysts Association, shows SEEK moved into a sideways trend, with a slight upward bias late in 2011 forming a shallow wedge pattern that became congestive. Its low point during the period was $5.20 and its high was $7.48.
A series of higher lows were experienced, then in December 2012, a strong rally began. On January 2, shareholders got a new year's present as the stock broke through the upper resistance level. Following the breakout, it ran up to $8.76, which proved to be a new resistance level, at which SEEK paused for two weeks.
But the upward thrust then continued, with the stock reaching $9.79. Here sellers stepped in, threatening to push SEEK below that price three times. It held firm and $9.79 became the new support level.
On their fourth attempt, in June this year, as world markets fell on fears US Federal Reserve chief Ben Bernanke would wind back quantative easing, those with a negative view managed to push SEEK down through the $9.79 resistance level.
Interestingly from a technical perspective, the previous resistance level of $8.76 then turned into a support level, which held despite several near-breaches in July and August. During that period, the previous support level of $9.79 turned into a resistance level that fended off several upward thrusts before the stock broke through with a strong rise on August 22.
Following that breakout, SEEK quickly reached a high of $11.41 on April 24. It broke through and this level immediately began acting as a support, fending off three downward moves. Thus the chart clearly demonstrates the technical-analysis dictum that resistance becomes support and support becomes resistance, with old highs and lows providing natural places for support and resistance.
On the downside, if $11.41 doesn't hold, the next support level would be $11.20, the point reached during a mini-rally culminating on May 22. If that were breached, $10.76 - a high reached in March - would serve as resistance.
On the upside, SEEK has spent time in sideways patterns then taken significant jumps. As a result, the next step up could see it move to the mid-$12 region.
On the fundamentals side, SEEK is trading on an expensive-looking price-earnings ratio of 28.1 times and a dividend yield of 1.9 per cent. However, it has returned investors 78 per cent in the past year, and 21 per cent annually over the past five years - despite the global financial crisis.
Last year revenues grew 40 per cent and profits 8 per cent. It is a market leader in Australasia and is going global, with operations in Latin America, Asia and Africa. Early supporter James Packer has been in and out of the stock twice, making big profits both times.
This column is not investment advice. Contact Rod Myer at firstname.lastname@example.org.