Sound Global's share price is currently at an important support level. This approximates 49.5c.
I am once again a shareholder of the company with a long position at 50c. I bought some shares towards the end of the day when I saw how the support seemed to be holding up.
Make no mistake, Sound Global's stock is in a downtrend but share prices go down a river of hope and hardly in a straight line. Although no one can say that the stock has bottomed, it could be that it has found a floor.
I see a higher low in the CMF even as share price dipped lower. We see a positive divergence. The MFI does not spot a higher low but it has just dipped into oversold territory. We could be seeing some buying activity as the stock becomes oversold with volume increasing today.
A short white candle with a lower wick formed today. Although not strictly a hammer, after yesterday's black spinning top, this is a promising sign that the downtrend has weakened and possibly coming to a halt. This short white hammer is a reversal signal which would need confirmation tomorrow.
Fundamentally, I like the company's business. I am concerned about its higher financing cost but in spite of this, it is still a very profitable company with very good prospects. The selling down of its stock might have been overdone by Mr. Market.
In fact, EPS is likely to improve in 2013 because of a very strong order book. With China bent on improving water and sewage infrastructure, I expect Sound Global to be a logical beneficiary. Trading at a PE of less than 10x, Sound Global's stock is inexpensive.
With the stock currently in a downtrend, however, for anyone buying on dips, adopting a trading mentality could be more rewarding.
Related post:
Sound Global: Lost 17.2% in a day.
Posts
Bloggy Award