Fevertree Technical Analysis (some fundamental)

Tuesday, 23rd July 2019 11:08 - by Rajan Dhall

Fevertree has been one of the best-performing stocks on my monitor over the last 4 years since their IPO. Now it seems that the stock market is looking at "gin fatigue" for a reason for the stock to sell off somewhat. Although this market obviously has a saturation point like many others where can we expect the fall to stop and the price to consolidate. Let's look at the report first.

Fevertree today released their H1 results:

• Overseas growth as UK sales only up 5%
• Sales jumped by 13% to £117.3 million in the six months to June
• Sales in the UK, which account for more than half of its total business, rose by only 5% (poor weather)
• Pre-tax profits rose from £32.7m to £35m
• Profit after tax was £28.32 million compared to £26.46 million
• Interim dividend up 23% to 5.20 pence per share

Below is the weekly chart, and looking at the psychological 2000p level it seems we are at a very important juncture. Price has used the 2100p level as a pivot point on at least 3 occasions and in late 2018 produced a rally of around 1100p following said bounce. Two weeks ago there was a very promising hammer candle set up at the 2100p support zone but unfortunately, this failed and the price was capped at 2326p. Once the 2100p level is conclusively broken technically we can say the chart is bearish as it would have created a lower high and lower low wave pattern but if we look closer at the daily chart we may get more clues. 

On the daily, things seem slightly worse in terms of the trend but if you look at the volume indicator at the bottom of the chart you may notice every time the price gets near the 2100p level buyers step back (circle) in with some force to buy the stock higher. This means the rest of this week is very important. Yes, today I expect the stock to close lower but for the rest of the week does that mean institutional traders and funds are looking for value at these levels after all the interim dividend is up 23% to 5.20 pence per share. A sustained move above the trend line would also indicate some buying pressure and a move to the 2500p resistance level could be on the cards. Having said that look for confirmation and as always there is always a chance that we could have a sustained dip below the 2100p level to aim for the psychological 2000p area. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.