After a decent rally in the beginning of June, the stock of the Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA: ML) corrected lower and wiped out all the gains made during the first half of the month. So far, the share price is moving in negative territory for the month, which raises a bit of concerns. However, that might not be the case for some buyers, as they could see this move lower, as a temporary correction. Any pullback in the share price might be welcomed by new potential investors. ML is considered to be a quality stock among others, as the company produces high quality tyres, which are mostly in demand. The company’s Beta is currently at around 0.0074, which suggests that the stock is less volatile than the market, what could suit more cautious investors. ML also has an attractive dividend yield, which is currently at 4.04%. That said, let’s not forget that higher yield doesn’t always mean that the stock is of good value, because the depreciating price of the stock might be boosting the dividend yield.
From the technical side, although the share price has been sliding from June 8th, it still continues to balance above its short-term tentative upside support line taken from the low of March 16th. Even if we see a bit more downside in the near term, as long as that upside line stays intact, there is a possibility to see another upmove. That said, for now, we will take a cautiously-bullish approach.
A move lower and a failure to break the aforementioned upside line could attract the buyers back into the game and lift the share price. ML might then drift to the 93.40 obstacle, a break of which may clear the way for a further move north. We will then aim for the 98.34 hurdle, which marks the inside swing low of June 8th. Slightly above it runs a short-term tentative downside resistance line drawn from the high of February 17th, which may provide an additional temporary hold-up.
The RSI had just shifted slightly below 50 and points lower. The MACD, although slightly above zero, is slowly grinding lower, while moving below its trigger line. It seems that both indicators are somewhat in support of seeing a small setback first.
Alternatively, if the if the previously-mentioned upside line breaks, and the share price slides below the 84.10 hurdle, marked by the low of May 22nd, that could keep new investors from entering, as further declines could be possible. If so, ML might drift to the 79.14 obstacle, a break of which may clear the way for a drop to the 72.30 level, marked by the low of March 30th.
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