Spirent Communications plc : Benefit from the overbought configuration
By Camille Chretien
Entry price | Target | Stop-loss | Potential |
---|---|---|---|
GBX 155.5 | GBX 0 | GBX 161 | +100% |
However, fundamentals remains worrying. Indeed, sales and profitability are unsteady (sales are expected down -15% and net profit -50% in 2013). Further, the stock is overvalued with a P/E ratio of 26.98x estimated for 2013 compared to 13.8x for the sector. Finally, EPS estimates are regularly revised downward since the beginning of the year.
The 18% rise, the stock has known since 1 July, should be stopped by the GBp 156 resistance. Indeed, the fundamental configuration does not justify such valuation for the stock. Overbought situation of technical indicators reinforce the downward potential.
A short position can be opened at the current price, in order to comeback to GBp 141.4 pivot point area. A stop loss must be fixed above the GBp 156 resistance.