As we know, the automakers did feel the heat in the beginning of this year, due to the lockdowns imposed around the world. Certainly, it had a knock-on effect on their major suppliers as well, as car production levels have fallen drastically. One of the big suppliers to the auto-industry is Gestamp Automoción SA (BME: GEST), producing metal sheets, which are later used by such car manufacturing giants like Volkswagen (ETR: VOW3), Ford (NYSE: F), General Motors (NYSE: GM), Peugeot-Citroen (EPA: UG) and others. Due to the removal of the lockdown, car production has partially resumed in Europe. This, of course, is helping carmaker suppliers to stay afloat and not go out of business. Although there are talks that a second lockdown might get imposed if the virus-infection cases surge sharply in Europe, until that happens, the car industry may be supported from collapsing.
Looking at the technical picture of Gestamp, after a strong decline in the first half of this year, the stock found good support near the 2.14 hurdle, which marks the lows of March 16th and July 10th, and then rebounded somewhat. However, the share price is still battling its medium-term downside resistance line drawn from the high of January 2nd, which once again got tested today. GEST would need to break that line first, before any upside scenario could be examined. Given the proximity of the price to that line, we will stay away from the downside scenario for now, unless the stock falls below some of our key support levels. Hence the neutral approach for now.
If, eventually, the aforementioned downside line breaks and the price rises and closes a daily candle above the 2.45 barrier, marked by the high of March 31st and also the current high of today, that may attract a few extra buyers into the game. GEST might then drift to the high of March 25th, at 2.66, a break of which could set the stage for a push to the 2.87 level, marked by the high of March 10th.
The upside scenario may be supported by our oscillators on the 4-hour chart. The RSI and the MACD are indicating positive divergence. Also, the RSI is pointing slightly to the upside, while balancing above 50. The MACD has been moving higher from around mid-March, but is currently stuck at zero with no clear indication of direction.
Alternatively, if the previously-discussed downside line continues to hold, and the share price slides below the lows of July 17th and 20th, at 2.27, that may spook any new investors from entering any time soon. Such a move may increase the stock’s chances of sliding further south, possibly aiming for the all-time low, at 2.14, a break of which would confirm a forthcoming lower low and open the door to an uncharted territory.
The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.
There are risks involved with trading of cash equities. Past performance is not indicative of future results. You should consider whether you can tolerate such losses before trading. Please read the full Risk Disclosure.
Copyright 2020 JFD Group Ltd.