Investors in AV Jennings, the developer with operations in south-eastern Australia and New Zealand, could be forgiven for feeling a bit jaundiced about the expression "as safe as houses".
As this week's chart, produced by Mark Umansky - a certified financial technician and councillor with the Australian Technical Analysts Association - shows, the company's shares have been on a roller-coaster ride for the past nine years. Using a quarterly timescale, the chart shows Jennings peaked at an all-time high of $2.25 during the March quarter of 2004.
It then fell constantly and steadily to an all-time low of 25¢ in the June quarter of 2009. That represents a decline of 89 per cent. From there, Jennings proved resilient, with the share price climbing 100 per cent to close just below 52¢ in the March quarter of 2011.
However, the good times were cut short with 52¢ proving a major resistance level and the shares fell back to about the all-time low in the June quarter of 2012. Then strong buying support came in at about 29¢, turning the stock before its nadir. Since then, it has climbed slowly towards the 40¢ mark. Umansky says if the professional market continues to support Jennings the stock may retest the previous resistance point at 52¢.
Should it breach that level, it will prove the stock has been in an accumulation phase for the past 17 quarters, a positive that could lead to further advances. During an accumulation phase, a stock is said to be building strength for further rises.
If 52¢ is breached and becomes a support level, Umansky says the next potential resistance level is about 77¢. That is calculated by projecting the entire accumulation period upward for an equal interval, which in this case is about 25¢.
The importance of the 77¢ level is enhanced by the fact it provided a historical support level in September 2002 (point C on the chart) and represents a retracement to 23.6 per cent of the all-time high, using the Fibonacci number series.
Should 77¢ be breached, the next resistance level may be around $1.10, another historical support level at point B in December 2006 and a resistance level at point A in March 2002.
Its potential strength is enhanced by the fact it represents another significant Fibonacci retracement level, in this case 38.2 per cent of the all-time high, and it is approximately a 200 per cent upward projection of the accumulation range. The fact that all four of the above factors occur around the $1.10 level lends further weight to its significance, Umansky says.
On the fundamental side, Jennings reported a net loss of $19.14 million for the December half, with revenues down 42.6 per cent. Analysts predict a full-year loss, but the company says it sees gradual improvements in the marketplace, with low interest rates, improved affordability and a likely market undersupply.
Experienced journalist Rod Myer brings you technical analysis on the performance of stocks and markets. This is his first column for Money. This column is not investment advice. firstname.lastname@example.org
Quirky Investments returns next week