In the wake of a turbulent earnings report that shook Aspen Pharmacare Holdings Limited (JSE: APN) back in August, the pharmaceutical powerhouse is gearing up for a potential rebound. Following a dip in profit attributable to equity holders, dwindling from R6.49 billion to R5.23 billion and leading to a shrink in earnings per share (EPS) from R14.32 to R11.77, Aspen faced a challenging market response despite a 5% revenue climb to R40.71 billion.
Witnessing an initial 8% plunge in share price aligned with the profit decline, the company encountered a shift in trajectory. Now, a promising resurgence unfolds as the share price embarks on a path toward recovery, signalling a potentially bright horizon shaped by promising technical developments.
Technical
The 1W chart shows a breakdown at the ascending wedge, triggered by its latest earnings report. However, since then, the price has found support at R161.56, where the potential recovery initiated, with the price recently crossing above the 50-SMA (blue line) of R170.62, signalling a bullish reversal in momentum.
The crucial level to look out for as we advance could be the 25-SMA (green line) at R178.75. A cross above this resistance could indicate that buyers are present in the shorter term. This could catalyze some momentum toward higher resistance at R182.41 and R188.44, where a retest could occur at the wedge’s breakdown point.
However, failure to leg above the 25-SMA resistance could indicate that the recovery could be unsustainable due to insufficient momentum. In this case, a reversion toward R167.33, the Fibonacci midpoint, could see the price fall back below the 50-SMA, with sellers potentially waiting to drive the price lower. Support at R161.56 and R159.50, the 61.8% Fibonacci golden ratio could then come into play as the pivotal support levels as we advance.
Summary
After an 8% slump in share price following its latest earnings report, Aspen’s share price looks to recover, with a 1.5% rise week to date. The resistance at R178.74 could be crucial in the upcoming sessions to determine whether the reversal could be sustained or whether it will fade for a contraction back toward R161.56.
Sources: Koyfin, Tradingview, Aspen Pharmacare Holdings Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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