Hi Lou,
I have been watching Intertape for almost a year now and jumped in and out last fall making some money. I certainly wish I had held it longer. I haven't seen many (any) stocks go up so consistently for so long.
Do you know what is behind the recent sell-off? I haven't seen any news to trigger it and was wondering if it crossed some point that triggered this change.
Eric
Hey Eric,
Thanks for the assignment. This will be the second time that I examine the case for Intertape Polymer Group Inc. The first was on May 4, 2012 on a request from Wayne when the shares were trading for $5.46. Three months ago the charts told the tale of a stock that had more in the tank and it was advised that ITP was a case of buying higher and selling higher. And that was exactly what happened until selling gripped the stock in late August of 2012, taking it from the $9.00 high down to its current price of $7.17 which represents a 20.33 per cent pullback.
There is nothing substantial in the news stream that would suggest there was a material change in the affairs of the company. However, if you spend some time with the second-quarter results that were released on Aug. 15, 2012, you might have made note of the outlook for the third quarter. Management provided guidance that the next quarter would look a lot like the second quarter and that investors would have to endure a period of volatility before an anticipated margin expansion stabilized.
If you go back to my last post on ITP you will see that Fabrice Taylor from The President's Club investment letter identified the opportunity when the shares were trading at $1.50. You can rest assured that investors who caught the ride at those levels had an incentive to take profits when they were told that the stock would experience a period of consolidation.
Another review of the charts will help clarify the opportunities and risks associated with the shares of ITP as we proceed through the rest of the year.
The three-year chart illustrates the advance that continued from the 2011 lows until the retreat that started in the last week. What is worth noting is that on the maximum charts that are available through globeinvestor.com the resistance that forms at $10.00 is visible as far back as 1993. In addition the RSI signalled a shift in momentum towards selling just days after the release of the second-quarter report.
The six-month chart indicates that the RSI and MACD both generated sell signals on Aug. 22, 2012. What is also evident is that the stock is trying to hold onto support at $7.00. At this point the best course of action would be to wait and see if $7.00 holds. If there is a breach at these levels you have to go back to $3.50 before any significant support comes in. What we want to know is if the current selling action is a correction or a full scale reversal.
If you own the stock, take some profits. If you are thinking of buying patience would be a virtue. The trend is your friend until it ends and right now the trend is down.
Make it a profitable day and happy capitalism!
Have your own question for Lou? Send it to lschizas@globeandmail.com.
Lou Schizas