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There is lots of fear in the air for some people trading the stock of NeraTel today. I won't be surprised if some people lost money as well. Why? A long black candle was formed on the back of relatively high volume. There must have been some panic selling as share price touched a low of 74.5c before closing at 76.5c.
However, this could be good news for some. Who? For people who have been waiting to buy into NeraTel because of its strong fundamentals and attractive dividend, of course.
The question on their minds might be whether it is the best time to buy now?
Well, if we remove the word "best" from the question, then, it becomes easier to find an answer. Linked to this, ask what is our motivation for investing in NeraTel.
My primary motivation for investing in NeraTel is for income. It was not to trade the stock. However, with the rapid and significant rise in the share price, I turned partial trader by reducing my long position in the stock last week.
As my primary motivation for investing in NeraTel is unchanged, the dramatic pull back in share price is a boon for me as I bought back what I sold recently. This means that the planned passive income from NeraTel's dividends in my portfolio is now restored.
Of course, I received a nice little bonus from trading around the investment as well. Quite happy to get some pocket money from Mr. Market, for sure.
Next question, will I increase the size of my long position in NeraTel at current prices?
Well, I think it is now common knowledge what NeraTel's full potential is. Apart from impressive growth potential, it is also a net cash company with a recurring income base. So, it is a stock anyone investing for income and growth would be attracted to. For anyone who is not in the know, I have provided links at the end of this blog for further reading.
Technically, a weak immediate support is at 76c. This is followed by the rising 20dMA which approximates 73c today. Failure of the support provided by the rising 20dMA to hold means a possible decline in share price to 66c.
Fundamentally, at 66c, we are looking at a PER of less than 10x once more and an estimated dividend yield of 6.06%. So, expectation for strong support at that price is not premised only on the technical picture but also on more attractive numbers.
I will be adding to my long position if supports are tested.
Related posts:
1. NeraTel: Trading around an investment.
2. NeraTel: A very good investment.
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