After peaking in early May on the day of their results, Macquarie Group was then heavily sold down (circled). This price action on the shares clearly suggests that the all the upside was factored in. And therefore means that the stock was too expensive. Since then, it has been struggling and we can see some lower highs and lower lows starting to set it. Looking at the chart, we think that investors should brace themselves for some more downside.
Currently the stock is edging higher in what appears to be a rising flag (indicated by the diagonal blue lines). Because the shares fell into this flag, then the most likely move out of this range would also be to the downside. That is, beware of a downside break as that would cause the Macquarie Group share price to continue falling.
Beyond this bearish flag, there is another pattern potentially emerging. It is too early to say, but price action also appears to be on the way towards forming a head and shoulders topping formation. If that does occur, then we could see the stock revisit its pre-Trump election levels in the low $70’s. However, at the very least it is worth keeping an eye on for now. For any of our clients looking to buy Macquarie Group, we have been advising them to wait for lower levels.
Michael Gable is managing director of Fairmont Equities.
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