Premier Foods plc : The GBp 38.25 support in danger
By Etienne Veber
Entry price | Target | Stop-loss | Potential |
---|---|---|---|
GBX 38.06 | GBX 31.5 | GBX 40.7 | +17.24% |
From a fundamental viewpoint, the financial situation of the company is fragile. First, we note the high level of debt of the company : financial leverage is at 4.66x in the prior year.
Finally, we note that analysts have revised downward, since the beginning of the year, forecasts of EPS. This indicator is very often precursors of a fall in prices.
Technically, the share is close to a major technical support at GBp 38.25. The breakdown of this strategic point would generate a sell signal for the most offensive investors. Then, stock prices could go toward new support areas at lower levels (GBp 31.5 by swing effect). The moving averages could put pressure on prices and lead them to a sustainable downward trend.
In this context, investors could take a short position below the GBp 38.25 in closing price to target the GBp 31.5 area. However, a stop order should be fixed at GBp 40.7.