DOW - Downer EDI

[winner69]

Interest on another thread - recent comments posted below

I think there will plenty of action around DOW - more bad news in the short term and then the big takeover .... could be interesting over the next few months

(AA) DOW - Downer EDI Limited is looking attractive today, was trading above $9 less than 6 months ago, got some today for $4.25.

(Jay) I was looking at them as well.
Looks like they are at or near the bottom, and with the big white candle on Friday, thought it could be a goer, but went further down today last time I looked, so trying head Mr P's advice and not buy a share going down! may wait and see what the Dow (US index) does overnight

(AA) To early to tell for sure Jay, but if we were to be completely honest just because something has been moving up doesn't mean it will continue to move up after you buy it.

on this attached chart ive added the ADX indicator, it measures price expansion of a trend (either up or down) over a period of time, greater the reading greater the rate of price expansion, many say it is a measurement of trend strength but you might just call it the rate of price expansion in a given direction... when price expansion in a given direction with in a given period of time gets too high it becomes unsustainable at that pace, often these are market enviroments where the current trend becomes exhausted and a trend reversal or consolidation/base is formed. In this chart the current trend is clearly down and the ADX is reading high i.e above 50, A reading above 50 is generally a unsustainable rate of volatility for most companies and leads to changes in momentum and supply and demand shifts within share registers. Ideally some might suggest to wait for the ADX to flatten out or even turn down,or to wait for the stock to trend up, to do so however often means the price may then be trading further away from the support zone or the market bottom and can mean greater risk (risk = the distance between your buy and you stoploss plus slippage) as your stoploss/sell point would be further away by the time you enter with those extra layers of confirmation. every thing in trading is a trade off.

So in summary high ADX readings can often lead to enviroments of opportunity, ofcourse this technique alone doesnt make a stock a buy but is one factor which may help put probabilities in ones favor, since winning in the market is all about favorable probabilities when used along with other tools and such like techniques chances of a sucessful trade become greater.

Downer EDI Limited is a rather large company which pays a dividend, i personally would be happy to continue to accummilate more at technically probable turning points should the price fall further and build a larger position in layers, the yeild is already very decent, the yeild will increase as the price decreases leading to price support . Many will advise this is a bad idea however, each to there own i guess.

In the last 10 years the ADX for Downer EDI Limited has only exceeded 50 once whist in a downtrend so its a fairly rare occurrence, last time it lead to a strong rally afterwards, shown in chart 4 on 17/8/07 below post.

(Jay) I was also looking at the reisitence/Support (as noted on your top chart) as well - at around 4.10- which it has seemed to bounce off.
I note the DOW and SP500 both down overnight so we shall see, although yesteray it did the opposite - go figure

(AA) Doubled my holding of Dow at $4.12, a close above $4.13 would be nice.

(AA) A good post written by Kacy on HC today:

Downer pays out over $100m worth of dividends each year. Geoff Knox has said they intend to pay it out again this year. If they had a cash flow problem they would not do that. As for Reliance Rail it is a ppp and the major shareholder is the NSW gov, and they are about to get voted out too.

This is not the first time a ppp has developed a cash problem. According to Knox, Downer is not at fault for the cost blowout and not liable for it. So its up to the NSW Gov and Downer to decide what to do about it. They wont make any decision until after the election and no need to either.

If there is an expectation that the private contractor should donate funds to a ppp whenever a cost blowout occurs it would create a dangerous precedent and give governments a blank cheque to spend spend spend at shareholders expense.

The only ones pushing for Downer to pay money into Reliance Rail are the Banks because they reckon its easier to get money out of shareholders than the government. They don't care where the money comes from. I hope Downer sticks to its guns on this.

I don't believe this will affect Downer's reputation or their bottom line at all. But it will make everyone think twice before entering ppp with any government. If Downer tender for a project and the project owner wants to pay more and get less from someone else then it is their loss.

Downer is good at what they do and the ones who matter know that. So whats the problem? Nothing! In the end the bottom line is all that matters. On those stats Downer must be the most undervalued company on the asx - and everyone knows it.

I'm not loaded up yet - still watching. The bottom is impossible to pinpoint. I will buy more this afternoon. I think the shorters are running out of bullets. (Now 0.14% shorted.) Its also bounced on a down day. A shadow is developing on the weekly chart and looking at previous bounces its due.

(AA) Downer off to a good start this morning, shorts getting burned and having to cover, buyers stepping up , just hit $4.14, looks like the pendulum is turning.

update: wow $4.20 now in just a few seconds

On my watchlist now

[winner69]

Caught doing a bit of window dressing to back the books better

Cash-strapped Downer digs in
http://www.smh.com.au/business/cashs...0628-zf64.html

With what it means to market sentiment

One more Downer derailing
http://www.smh.com.au/business/one-m...0628-zf7e.html

[macduffy]

Quite amazing this price today!, are you getting tempted at all Winner69? It does look like the scare media has had its effect, or is it simply tax loss selling before the 30th?

I think it's more a relection of the state of the market which has had some big "profit downgrade" scares in recent times - Sigma, ELD, NUF etc - and fears more.

A lucky escape personally. I almost bought in at the first bad news announcement but then remembered that the first profit downgrade is often not the last.

[winner69]

AA - on Winners watchlist and closely watching developments

But wheres there smole theres usally fire and things seem to be coming unstuck at DOW

Reading those announcements I thought better they keep their mouth shut but no they didn;t

Give more ammo for the papers to beat them up

Downer's confusing 'clarificatio


http://www.smh.com.au/business/downe...0629-zh6e.html

[COLIN]

And to think that David McEwen's company (IRG) several weeks ago recommended DOW as a buy! (I didn't -not that I would be given to following his advice anyway.)

[winner69]

Talk of equity raisings .... at $3.00 ouch .... the need to rebuild credibility I fear will make those charts look sicker over the next few months AA

Getting to understand a bit more about DOW fundamentals and they don't make me feel all that comfortable .... but at some lower price than todays maybe worth it

[soulman]

To be honest, DOW looks sick and if they do strike green, it would be because they were sold down too fast, too soon.

Also, there is a possibility of LEI taking a stake in DOW under their anticipated equity raising or even LEI coming up with an offer for 100% of DOW. The risk reward is currently pretty much in equilibrium but if div were to be cut/eliminate to save on cashflow, then it's all downhill for DOW.

Good luck with your trading AA.

[soulman]

Definitely AA. My post was basically saying to stay out of DOW and "IF" they do go green, it would be because short seller buying back to lock in profits or a dead cat bounce.

[winner69]

The charts really looking a bit sad now AA eh

Have done a bit more study and finding it hard to look DOW on any fundamental basis at the moment .... I get the feeling that their business model could be severley tested over the next few years .... will still keep watching though as one day their might be an opportunity

[macduffy]

I suspect that you're right, a-a, so it's on my "maybe" watchlist.

I'll be hoping that the TA experts, yourself included, will ring a bell at an opportune time!

Cheers