Small bank, big potential
The bank has had a solid run-up since touching a three-year low of $6.82 in May 2012. In the following year, it gained 66 per cent and reached a high of $11.38 this May before the market suffered a significant setback. That correction saw Bendigo slide about 18 per cent to $9.30.
The stock has recovered from those lows, but has not yet bettered its May highs. We can use technical analysis tools to check the strength of the rally and give investors an idea of the recovery's sustainability.
To do this, the chart divides Bendigo's fall from its May highs using Fibonacci number ratios, with the May top being 100 per cent and the June low of 0 per cent. Following the May downturn, the stock found support at the 50 per cent Fibonacci level before falling to its nadir. Then as the recovery began, there was resistance at the 38.2 per cent level, the inverse of the significant Fibonacci level of 61.8 per cent. After three attempts to breach it, the 38.2 per cent resistance level turned into a support, as did the 50 per cent level once it was breached. Now the 61.8 per cent level has also turned into a support, which has held in the face of several declines since. Bendigo's price has remained above the 61.8 per cent level for three weeks, an indication of strength to technical analysts.
An extra sign of strength in the chart is that the price has remained above $10.60 (the high touched back in February) for three weeks, which represents another resistance level turning into a support.
Using a candlestick chart that measures intraday as well as closing prices, the 61.8 percentage line comes out at $10.60. That is a further sign of strength (the candlestick chart is too complex to show here).
The 30-day moving average line gives us another indication of strength. From November to May, the 30-day line represented a support level rising with the share price. The May bust saw the stock fall through the average, which also turned down as the rout gathered steam.
More recently, the average has turned up with the share price crossing it on July 5, and once again the 30-day line is assuming a support role.
The next point of resistance is the old high of $11.38. Traders will be watching for signs of weakness if that level is approached. Should it break through May's high, there is a strong likelihood the uptrend will continue.
On the fundamental side, Bendigo is trading on a price-earnings ratio of 12.8 times , slightly lower than the sector average. It is growing its earnings about 18 per cent a year and is paying a 60¢ dividend, representing a 5.56 per cent yield.
Banking on a rise
Frequently Asked Questions about this Article…
According to the article, Bendigo hit a three-year low of $6.82 in May 2012, then gained about 66% the following year and reached a high of $11.38 in May before a correction pushed it down roughly 18% to $9.30. The stock has since recovered, trading above key technical levels (including $10.60 and the 61.8% Fibonacci level) but had not yet closed above the May highs at the time of the piece.
The article explains that using the May high as 100% and the June low as 0%, Bendigo found initial support at the 50% Fibonacci level, faced resistance at the 38.2% level (which later flipped to support), and has since held above the 61.8% level for three weeks. Technical analysts view staying above the 61.8% line as a sign of rally strength and a more sustainable recovery.
The $10.60 price is highlighted as an important technical level: it was a high touched in February and corresponds roughly to the 61.8% Fibonacci retracement on a candlestick chart. The stock remaining above $10.60 for three weeks signals that a former resistance has turned into support, which technical analysts interpret as a positive sign.
The article notes the 30-day moving average acted as rising support from November to May, then the May sell-off pushed the price below it and the average turned down. More recently the 30-day line has turned up again, the share price crossed it on July 5, and it is resuming a support role — another technical indication of strength when combined with other signals.
The next key resistance is the old high of $11.38. The article says traders will watch for signs of weakness if that level is approached; if the stock breaks through May’s high, there is a strong likelihood the uptrend will continue, according to the technical view presented.
On the fundamental side the article reports Bendigo trading on a price-earnings ratio of about 12.8 times, slightly below the sector average. It’s growing earnings at roughly 18% a year and paying a 60 cent dividend, which represents about a 5.56% dividend yield based on the figures cited.
The article suggests the banking sector has been popular since the market turnaround and that interesting opportunities can exist among smaller players like Bendigo and Adelaide Bank. It highlights that technical and fundamental analysis can help everyday investors assess whether a smaller bank’s recovery and valuation present an attractive opportunity.
The piece recommends combining technical tools (Fibonacci retracements, support/resistance, 30-day moving average, candlestick confirmation) with fundamentals (P/E ratio, earnings growth, dividend yield) to judge rally strength and sustainability. Investors should watch key support levels (like $10.60 and the 61.8% line), the 30-day average, and how the stock behaves around the $11.38 resistance for signs of either continuation or weakness.
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