Old Mutual Limited (JSE: OMU) reported a 28% rise in full-year profits, exceeding market expectations. This positive performance stemmed from double-digit sales growth and a significant increase in new business. The company declared a final dividend up 4%, showcasing confidence in future prospects. However, despite strong earnings, OMU’s share price has declined in the past six trading sessions, seemingly reflecting investor concerns over the broader operating environment.
While Old Mutual boasts strong sales and new business growth, particularly across its African operations, rising interest rates and challenging economic conditions in South Africa, including power cuts, introduce elements of risk. Despite these headwinds, Old Mutual maintains profitability and plans to launch a new South African bank in late 2024, potentially bolstering future revenue streams.
Technical Analysis
The post-earnings price rally appears to have stalled, with OMU’s share price opening slightly lower on the day of the release. This weakness aligns with the technical indicators. Despite the gap up on the aftermarket session, the share price opened below the crucial 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line). Additionally, the recent bearish crossover of the 50-SMA below the 100-SMA suggests a potential shift in short-term momentum.
With the RSI (49.87) losing steam below the 50.00 level, the continuation of the downward pressure could bring the 1,140 cents into focus in the near term. A sustained break below the psychologically significant 1,140 cents level, accompanied by significant volume, could expose OMU to further downside pressure, potentially reaching 1,106 cents in the near term.
Conversely, renewed buying pressure during the session could bring the SMAs-enforced 1,202 cents resistance level into play in the near term. A breakout above this level, coupled with a bullish RSI reversal, could signal a return of positive sentiment and potentially pave the way for a move towards 1,234 cents and 1,265 cents.
Summary
Old Mutual’s share price currently navigates a tug-of-war between positive earnings and technical resistance. While strong fundamentals provide a supportive base, the recent price decline and bearish technical indicators suggest potential short-term weakness. Key levels to monitor include support at 1,106 cents and resistance at 1,202 cents. A break above or below these levels will offer further clarity on OMU’s near-term price trajectory.
Sources: TradingView, Old Mutual, SimplyWallStreet, Business Live, MoneyWeb.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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