A trading opportunity in Hill and Smith

Hill & Smith Holdings PLC is a United Kingdom-based holding company. The Company is engaged in the manufacture and supply of infrastructure products and galvanizing services. The Company operates through three segments: Infrastructure Products-Utilities, Infrastructure Products-Roads and Galvanizing Services. The Infrastructure Products-Utilities segment contains a group of businesses supplying products to public and private customers involved in the construction of facilities serving the utilities markets or in the maintenance of such facilities. The Infrastructure Products-Roads segment contains a group of companies supplying permanent and temporary safety products to customers involved in the construction or maintenance of national roads infrastructure. The Galvanizing Services segment contains a group of companies supplying galvanizing and related materials coating services to companies in a range of markets, including construction, agriculture and infrastructure.

During the course of the year, I traded in Hill and Smith. Although I gave back some of the profits in the run up to the US election, it was still a very profitable trade. The chart of HILS.L is shown below. The share is valued by VectorVest at around 1500, while it’s currently trading at 1177. Both earnings potential (RV) and earnings safety (RS) are excellent. Although I missed the strong upward move after the US election result, the share is starting to look very interesting again.

hill

Since HILS.L broke the 52 week high in Mid-November, the share has traded sideways to down in a “flag” pattern. This is a bullish pattern. In a share with excellent fundamentals, the flag is a strong reason to be patient and watch carefully for an entry, if and when, the share breaks upwards.

On the above chart, I also show the “Stochastic indicator”. This was designed by a mentor of mine named George Lane. His course was the first I attended on trading, in the winter of 1986. The stochastic is showing an oversold situation and also supports the view that a break upwards is probable. The chart also shows that the stochastic is divergent with the price of the share. The share is making a rising bottom, while the Stochastic is making a falling bottom. This is reverse divergence, and it invariably precedes a high momentum move.

Also on the chart, I have drawn both a FIB retracement of the last daily range and a simple trendline which defines natural support within the uptrend.

Notice that the trendline support and a 62% retracement of the last range come together at around 1115. This is known by technically biased traders as a confluence of support. I think there is a strong probability that the share can pull back to this level before any move can take place. This is where the smartest money will have their orders. Typically this will be an intraday move, with maybe the share being down at the 1115 level for a few minutes. Please look at a 3 month chart to view the confluence of support in detail. I assure you, that’s what the City Boys will be doing.

A reversal candle such as a “hammer”, “outside day” or a “morning star” would be great confirmation that the move was on its way. A trader by the name of Bigalow suggests using an 8 day exponentially smoothed moving average to confirm an entry. A close above the average would certainly be very positive and I will wait for this confirmation before buying a few. If the move keeps going, I add.

If anyone is struggling to add moving averages, trend lines, Stochastic or FIB to your charts, then please call support on 0800 014 8974 in the UK and 0800 981 891 in SA.

I wish all reading a very Happy Christmas and a healthy and wonderful 2017.

David Paul

December 21st 2016

4 thoughts on “A trading opportunity in Hill and Smith

    1. Hello Rob Thanks for the comments. They are much appreciated. I will look at SUS and email you

      Happy New Year

      david

  1. Hello David,
    I hope the Christmas break is treating you well.
    HILS also looks interesting on the Weekly Zone chart with a hammer forming right on the 20 week MA.
    I’m also keeping my eye on JD Sports. The Value line has turned down on the chart which is a bit disturbing. If the price drops to below 300 I’ll be looking to take profits.
    Cheers, Alex

    1. Hello Alex Sorry to have missed the last two Oxford UG meetings but will be there in Jan. I see JD is at the bottom of my portfolio as sorted by RT. It needs to be watched for sure. I bought a few hill and smith a few days ago. Happy New Year best wishes david

Leave a Reply to Alex Cancel reply

Your email address will not be published. Required fields are marked *

Home
×
Menu