Little-fish telco's big swim
Telco small fry iiNet is moving into an interesting and potentially profitable formation, according to this week's chart, produced by Paul Ash, Victorian president of the Australian Technical Analysts Association.
For more than a year, iiNet has been in an up trend, with the price rising more than 120 per cent since last July. Before that, the stock spent six months oscillating sideways (not shown on this chart).
The recent run up saw a peak in May of $6.89 in intraday trading. Since then, the trading range has been contained between $6.89 and $5.17.
Such a rally would likely begin with the stock breaking above $6.55, where the share price on its predicted trajectory is likely to break through the upper-resistance level. Ash says patience is advisable in the current situation and it may be wise not to enter the market before the $6.55 level is breached.
That level would put the price above the upward-trending 30-day moving average. Another positive sign lies in the fact the lower support line can be extended back down to the left, showing it effectively underpins last year's price action.
So where is an upside breakout likely to take us? One possible way to determine a target is to run a line upwards from the breakout the same length as the line labelled A, which forms the symmetrical triangle base. Line B gives an upper target of about $8.16. But that target is conditional on the price breaking through the resistance line in the next two to four weeks. If that doesn't happen, a new chart will need to be drawn.
iiNet has a dividend yield of 2.7 per cent, a price-earnings ratio of 15.7 times, is achieving sales growth of 30 per cent, and has a market capitalisation of $962 million. In the December half, net profits were up 122 per cent to $31.9 million.
The company has built up 1.7 million customers in the broadband, mobile, fixed line and online television sectors. Its internet service provider business uses DSL networks, which largely runs on Telstra copper.
iiNet has a strong history in the sector, having taken over industry pioneer OzEmail, launched with the help of now-opposition communications spokesman Malcolm Turnbull, who is said to have made $57 million selling what was initially a $500,000 investment.
This column is not investment advice. firstname.lastname@example.org
Up and up