What’s Happening to the Share Price of Downer EDI Ltd?

Downer EDI logo

What does Downer EDI Ltd do?

Downer EDI Ltd [ASX:DOW] is a multi-discipline company, which provides engineering services to roads, rail, airports, ports, mineral processing, oil, gas and industrial plants, power and gas assets, water, renewable energy, communications and construction and project management.

The recent annual report to shareholders on 6 August made a forecast of declining revenues for 2016. The cause was mainly due to a decline and weakness in resources based construction and mining.

On the same day the Sydney Morning Herald said this:

‘Downer’s 2015 net profit after tax of $210.2 million, which was down 2.7 per cent on the previous year, was in line with guidance but investors were surprised by the weak 2016 forecast.’

That’s interesting, but what is the chart telling us?

What does the chart look like?

I find it helpful to bring up a chart. The daily chart of DOW.

Downer EDI

Source: STEX

Some investors may have been surprised by the weak 2016 forecast, but nothing surprises the market. Nothing.

You could conceivably have bought DOW shares at the end of May.

If you did that, can you see, looking at the chart, that the market told you not once, not twice, but three times bad news was coming. You can see that, yes?

Because if you can’t see that, you must go here, not next week, not tomorrow, now.

What now for DOW shares?

We could expect further news confirming declining revenues. Just as was forecasted in the annual report.

If you bought DOW shares at the end of May, you don’t want to be holding it. It’s soul-destroying.

You have to be a little proactive in your risk management. You have to listen to the market. The weight of money tells you in advance.

Use the charts to tell you what is really happening within a company. Before you read about it in the announcements and the financial press.

You can get started on that here.
Terence Duffy,
Research Analyst, Cycles, Trends and Forecasts

Join The Daily Reckoning on Google+


Leave a Reply

Be the First to Comment!

Notify of

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au