5G Networks Ltd: Can the Share Price Run up Continue (ASX:5GN)

5G Networks Ltd: Can the Share Price Run up Continue (ASX:5GN)

5G Networks Ltd [ASX:5GN] might just be running out of steam. The Melbourne-based telecommunications company shot up over 350% through the middle of 2020.

But the run up may have come to an end, with the 5GN share price falling back 28.89% over the last two weeks.

ASX 5GN Share Price Chart 1

Source: Optuma

What’s happening at 5G Networks?

5G Networks operate across the country in all manner of telecommunications, managed IT and cloud computing.

So far 2020 has been a very good year for the company.

The run up in the stock price this year allowed the company to achieve a market cap of $185.42 million and even start a takeover bid for Webcentral Group Ltd [ASX:WCG].

Webcentral is Australia’s largest full-service digital service agency for small to medium business’, as stated on their website.

With the off-market sale looking likely to go ahead at 18 cents per share.

While things are looking up for 5G Networks, the question is can the company withstand the changing market conditions in the All Ords [ASX:XAO]?

Where to from here for the 5GN share price?

After an incredible rise through 2020, the share price reached a high of $2.44 before falling away sharply.

Before this high, the share price moved sideways for roughly a month — the interesting part of this movement was the volume.

Volume expanded into this pattern of sideways movement before declining massively (apart from one day in the middle).

This can usually be a sign that the large investors have taken the profit they were looking for and are now planning their exit through a distribution phase. The average speculator can get trapped in this if they’re not careful; as they tend to believe the run up is still on!

ASX 5GN Share Price Chart 2

Source: Optuma

As the share price fell away, volume increased with it, indicating a lot of positions being offloaded.

At time of writing the company was in a trading halt at $1.735.

ASX 5G Networks Share Price Chart 3

Source: Optuma

Once trading resumes, should the share price fall away then the level of $1.514 may be strong enough to halt a further fall — which the share price rose to back in June before falling away.

In contrast, if the share price were to rise out of the trading halt then the levels of $1.798 and $2.081 may come into play — which was the levels that formed the floor and ceiling of the most recent distribution pattern.


Carl Wittkopp

For The Daily Reckoning Australia

PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.