One for trend followers possibly?

17th Jan '19 by Taff6

8 comments 2375 reads

Jupiter Fund Management (LON:JUP) closed above the 20 Day high and initiated breakout high for turtle traders for the first time since June 2018.
More on Turtle Trading
https://www.stockopedia.com/co...
The June 2018 breakout proved to be a false breakout, will it be any different this time? May be worth waiting for ADX crossover to strengthen the signal or another confirming indicator/overlay of choice
Buy Zone is represented by the blue channel
Channel width is approx 8.5% as measured with stocko measuring tool (Think stops)

Bull case

Chart indicates that Jupiter Fund Management (LON:JUP) is a suitable candidate for trend following systems
Well respected bond fund offerings (may offer some downside protection in turbulent markets for those who are bearish)
Good Dividend yield for farmers
Q rank 96

Bear case

EPS Downgrades
High redemption's in some (Euro Bond) fund offerings
Firm downtrend established (however sentiment does change with time)

qualifies for 2 Screens 1 long and 1 short

Anyone have any views on £JUP

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dmjram

17th Jan '19

It's in a long term down trend - per Livermore/Weinstein/Tudor-Jones/Minervini etc. etc. why would you be looking to go long on it?

shipoffrogs

I think the redemptions that have recently impacted the share price sit in their bond funds, not the equity funds.

About 4% of the shares are currently being shorted - I can't figure out why, and wonder if shorting a fund manager is just a better way of shorting asset values than shorting indices. The shorts increased the last few days following their last update.

On fundamentals it looks quite attractively priced though.

Benson212

Despite price breaking out of a consolidation area near its 52 week low, I’m not convinced this is an early opportunity to go long. When buying a share, you need to put it into context with the larger fundamental and technical trends.

From a technical perspective, price action is weak. The stock continually fails to rally out of consolidation areas, before reversing and continuing its downtrend. If the stock has truly found a bottom and now in demand, we want to see an ‘institutional thrust’ on the buy side. Volume should be at least 60% above the 50-day average with strong follow through days (i.e. continued buying for a number of days afterwards, with relatively small pullbacks). Look at the volume behaviour in 2017, when the stock was in an uptrend. We saw large volume on up days compared to down days, a strong sign of institutional demand. This is what we want to see as it emerges from its lows. This must coincide with constructive price action, similar to the VCP on 07/07/2017 offering a low risk entry point.

But what causes institutional demand…? Fundamentals!

The market loves growth (or the expectation of growth) which is why fundamental analysis is so important. The long run quality scores are excellent, with strong operating margins and ROE. This significantly increases the probability of a turnaround when market/industry conditions are more favourable. However, as most of us have experienced, a quality company must show signs of growth for it to move higher. It needs to surprise the market. I primarily focus on quarterly earnings growth and these are still lacklustre:

- Quarter on quarter earnings and sales growth is -2.6% and -0.083% respectively.
- It has seen positive quarter on prior year quarter earnings growth of 2.96%, nothing to get excited about.
- No positive EPS surprises in the last set of interim results.
- Forecast EPS growth and upgrades have been revised down (i.e. the market expects further fundamental deterioration).
- Continued capital outflows.
- Operates in a cyclical sector which is highly sensitive to global market performance.

We need to see strong quarterly growth before institutions perk up and take notice. As a minimum, we must wait for the next set of interims and assess whether growth is picking up, especially if management have given steer to brokers with revised, downward EPS growth.

In my personal opinion, this is high risk situation. I look for the complete opposite on both a fundamental and technical perspective. Investing isn’t about buying the ultimate low, it’s about buying a low risk entry point where reward significantly outweighs risk, wherever that might be. There is a huge amount of evidence to suggest stocks with deteriorating fundamentals and technicals lead to portfolio underperformance.

I would suggest applying this to shares in uptrends with growing fundamentals. Your system will still provide breakout signals but with a much higher probability of success (and potentially less false signals too!).

Taff6

Shipoffrogs
I’ve updated post to reflect outflows in bond funds
Looks like the shorts are looking for a break lower, however momentum looks to be fading and money flow looks encouraging, just have to wait and see what happens on test of PRZ. Thanks for highlighting my error and alerting of short interest.
Short Interest is as follows

aflash

20th Jan '19

Since I want to encourage columns and posts like this, here is my contribution.

Taff6 seems to have changed software to one much easier to follow and added some excellent other images.
BH1991 produces some powerful arguments to which I reply:
It may be a false breakout but those shorts have to be covered some day. When they are there will be an explosive jump to the upside and I want to catch it.

Since the stock is trading at a 5 year low I looked at the fundamentals which are also covered in this column.

Stockopedia metrics: For argument's sake I took three U.K. boutique asset managers which could be compared and one huge U.S. house to gage the market mood.
JUP has the best Value Rank but only just. Blackstone (NYQ:BX) is almost as cheap.
JUP has almost the best Quality Rank and only CLIG (City of London Investment) is considered slightly better.

The other boutique, MGR (Miton), shines in another data base I use which gives a very different story. It analyses 'Relative Value', mainly using long bond yields and the Earning's yield. Here JUP scores way below not only the three studied but almost all other asset managers.
Then the 'Growth Rate' of this data base also finds JUP lacking with a score of -4 against MGR's 26.

One has to conclude BH1991 may be correct.

However when he writes: 'Investing isn’t about buying the ultimate low......' I reply 'Oh Yes it is when shorters are around.'

No-one knows where the ultimate low is until after it has happened but I shall be checking price action. If the fundamentals are as bad as most people here and the other data base suggest there will be a moment of capitulation from holders. One may only have a few minutes before the shorts are covered.

schober

big.chart?nosettings=1&symb=UK%3aJUP&uf= Well the primary trend is down.
If it breaks resistance at 350 (and stays above for a few days), an initial SMALL long might be justified
If it breaks support at 300 then onwards and downwards.
As the descent has been so steep, more likely scenario is a long base forming period whilst longs and shorts are unwound and the stock remaining range bound

Fundamentalists need to find out if the bonds in the funds are just above investment grade. IF there downgrades to junk status then the funds might become forced sellers into a very illiquid market. Watch out for loans to uk and eu firms exposed to brexit woes and small us shale oil cos.

Mnomis

Picked up on one of my screens (which triggers very few companies). Will look into more fully when time permits. Key question for me will be how placed to profit from cheap UK equities if Brexit turns out to be less bad than people fear - bought Redrow (LON:RDW) a few weeks ago with similar logic ...

21st Jan '19

Hi aflash,

I agree with your analysis and with the correct strategy, it’s possible to trade shares within a long term downtrend. Short sellers will need to cover their positions and technical analysis can help you identify this point. However, I believe short covering must coincide with a material change in fundamentals, for it to change the stock’s long-term direction.

Otherwise, you’re merely trading a technical bounce (or dead cat bounce). There is nothing wrong in trading a technical bounce, provided you’re nimble and can sell into strength. Once the short sellers have covered their positions, the stock is likely to rollover and continue its downtrend (you see this after most profit warnings).

See Taptica International (LON:TAP) below:

5c45fdc58a7eeChart-taptica-international

Because most technical bouces are short lived, your timing must be impeccable.
However, if you combine this with a material fundamental change, institutions will likely support the stock. Price pullbacks will be subtle and constructive.

See Telecom Plus (LON:TEP) below:

5c45fdda329d1Chart-telecom-plus-2102019.

If I traded Jupiter Fund Management (LON:JUP), this is what I want to see. Constructive technicals combined with a fundamental catalyst. I aviod trading technical bounces because they are short lived and prone to failure. I appreciate I'm not buying the ultimate low, but I want to see the stock behave correctly before taking on risk.

All thoughts are welcome! :)

One for trend followers possibly?

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Taff6

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