Investors tend to make judgments about the performance of stocks through the prism of recent history, but technical analysts often use a range of time frames to get a take on what is going on.
This week's quarterly chart of bionic ear group Cochlear, produced by Mark Umansky, a certified financial technician and councillor with the Australian Technical Analysts Association, is a case in point.
Anyone looking at a chart of Cochlear over the past 12 months would notice a steep fall from highs of $82.87 in February to lows of $52.71, followed by a slight recovery to around $62. The falls were driven by
concerns about increased competition in its markets and the ravages of the then high Australian dollar.
The market in the stock was still a bit jittery following a near-halving of its value in 2011 after a product recall that caused a loss for the first half of the 2011-12 financial year.
But a look from the perspective of the stock's journey since listing in the
mid-1990s shows its trajectory in a different perspective. Those fortunate enough to get in on listing saw their investment grow for six years, the price rising 16 times to a high of $49.81 late in 2011. However, in December 2001 the game changed, with the stock going into decline and giving up some of those stellar gains. When it bottomed out around $20 in early 2004, it had given up 56 per cent from its highs.
After some consolidation, support
appeared from the professional market and Cochlear convincingly broke to the upside, bettering its then all-time peak of $49.81 and reaching $77.96 in 2007.
Then things changed again, with the stock moving into a six-year congestion phase.
There have been two breaks above the 2007 highs, along with two dives, to around the 2001 peak level. As technical analysis would expect, what was a resistance level in 2001 has since turned into a support level, and levels around the 2007 peak have
become confirmed resistance levels.
The question for investors is where to from here. Umansky says watch to see if the congestion level is broken to the upside again. If it is, there could be an upper target of around $120, on previous performances.
Analysts are expecting its earnings per share to rise from $2.324 last year to $2.948 by 2015. Last year investors lost 4.8 per cent holding it but have made 4.2 per cent a year over five years and 10.2 per cent over a decade.
This column is not investment advice.
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