Vesuvius trading at important level of technical support
Bullish trend-line support at about 440p broke the recent fall in Vesuvius’s share price.
FTSE 250
19,601.98
17:09 25/04/24
FTSE 350
4,434.34
17:09 25/04/24
FTSE All-Share
4,387.94
16:49 25/04/24
General Industrials
6,780.26
17:09 25/04/24
Vesuvius
472.50p
16:44 25/04/24
That area coincides with technical support at the 61.8% Fibonacci retracement of the entire upswing in the share price from October’s lows around 388p to the March highs at 530p.
A potentially very interesting strategy would be to open long positions in Vesuvius at current levels; but we must keep in mind the importance of this support. Its loss could lead to a swift drop to next support, which comes in at 410p.
To try and limit that risk, we would set a stop-loss at £4.35.
If support at 440p is not taken out on a weekly basis, the odds would seem to be in favour of a continuation of gains up to the last bearish gap situated towards 500p.
From a fundamental perspective, we could classify Vesuvius as a value trade given the fact that it has a price-to-earnings multiple of 12.35, a price-to-book of 1.36 and a dividend yield of 3.6%, all considerably than its sector peers.
Financial theory holds that these ratios should help indicate whether Vesuvius is undervalued or not. As is often the case, markets may have overreacted, depressing the stock’s share price relative to their fundamentals.