Super results for Super Retail but can it continue upwards?
This week Paul Ash, Victorian president of the Australian Technical Analysts Association, is focusing our attention on one such company, Super Retail Group. The company was trading on a flat trajectory until around last September when things turned upwards.
The upward move developed into a strong rising trend channel to February this year. Then the uptrend steepened, with the price spiking from $10.50 to above $12 and breaking through the top of the rising-trend channel. The overall share price rise in the past 12 months has been a whopping 67 per cent.
The question now presented is whether there is further growth potential for the stock. Ash says that the latest breakout to above $12 would normally be seen by technical analysts as a possible end to the uptrend because, after such a steep rise breaking through an already rising trend line, share prices tend to take a breather and go into a consolidation period.
This could be around current levels or could involve a retracement back to the $11.50 level, where it broke through the top of the rising-trend channel.
Super Retail has a pretty convincing set of fundamentals, reporting a 74 per cent profit rise in the six months to December on a sales rise of 37 per cent and pre-tax earnings up 62 per cent, with most areas of the business performing well.
Super Retail Group is a retailer of car and leisure products through 580 stores in Australia and New Zealand. Store brands include Rebel Sports, Ray's Outdoors, Supercheap Auto, Amart Sports, BCF Boating Camping Fishing and Goldcross Cycles.
Given that strong underlying performance, Ash says there might be further upward momentum in Super Retail and the current pull-back from $12.34 to levels of $12.05, after falling below $12, last week might represent the bottom of a correction. But if the stock falls further and goes down through $11.50 it could suffer a severe correction, losing up to 50 per cent of the last year's gains before turning up again.
So those considering buying because they believe the momentum might continue might like to put a stop loss in just below $11.50 to make sure they aren't caught by any downward breakout. Any prolonged move to below $12 would be enough to throw open to question the "blow-off", or upward breakout, from the rising-trend channel, Ash says.
This column is not investment advice. rodmyr@gmail.com
Frequently Asked Questions about this Article…
Super Retail Group's share price has had a strong run: it was relatively flat until about last September, then moved into a rising trend channel that steepened into February. The stock spiked from about $10.50 to above $12 and has risen roughly 67% over the past 12 months.
Technical analysts are watching the recent breakout above $12, which can sometimes mark the end of an uptrend and lead to consolidation. Key levels to watch are $12 (psychological/technical pivot), $12.34 (recent high) and $11.50 (the level where it broke through the rising-trend channel). A retracement to $11.50 or consolidation around current levels is possible.
Yes — given Super Retail's strong underlying performance, further upward momentum is possible. However, the steep recent rise means the stock may need to consolidate or correct first. Momentum continuation is not guaranteed and technical caution is warranted.
If Super Retail falls back through $11.50 it could trigger a much deeper correction — the article notes the stock could lose up to around 50% of last year's gains before recovering. Even a prolonged move below $12 would raise questions about the recent 'blow-off' breakout from the rising trend.
The article suggests that buyers who believe momentum will continue might consider using a stop loss just below $11.50 to avoid being caught by a downward breakout. This helps limit downside if the stock breaks key support levels.
The article describes Super Retail's fundamentals as convincing: in the six months to December the company reported a 74% profit rise on a 37% sales increase, and pre‑tax earnings were up 62%, with most areas of the business performing well.
Super Retail Group is a retailer of car and leisure products with about 580 stores across Australia and New Zealand. Store brands mentioned include Rebel Sports, Ray's Outdoors, Supercheap Auto, Amart Sports, BCF (Boating Camping Fishing) and Goldcross Cycles.
No — the article explicitly states it is not investment advice. It offers technical and fundamental observations that can help inform your view, but you should consider your own financial situation and, if needed, consult a licensed financial adviser before making investment decisions.
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