RSS Galvan Chartbreaker - JOHNSON MATTHEY BOOST (1,925p)
By Ed Woolfitt | 05 April 2011, 13:38 BST
Ed Woolfitt, Head of Trading at Galvan
At the beginning of February speciality chemicals group Johnson Matthey said it expected its underlying performance for the full year to be slightly ahead of previous company expectations after third quarter profits rose by 34%. The trading performance was driven by robust demand in its key markets, the group said in a company statement. Sales excluding precious metals were up 22% of the same period last year and slightly up on the second quarter of the year. Operational leverage and higher precious metal prices resulted in underlying operating profit rising 31% on the same quarter the year before. Profit at Johnson Matthey's environmental technologies business rose 14% while its fine chemicals unit delivered only slight growth.
In Johnson Matthey, bulls have both a company where demand for its products has continued to grow, and where the company itself benefits from rising metals prices. The latest profits guidance hike is the fundamental icing on the cake, and marks out the shares as a buy at Galvan Research.
The Johnson Matthey chart shows that the shares have started the week above the 50-day moving average at 1,897p and have equalled late March intraday resistance at 1,901p. This should be sufficient to start a new leg to retest the February highs through 2,000p. Only sustained price action below the 20 day moving average at 1,844p would be enough to delay the upside scenario.
| Dream Scenario | The recent profits guidance hike provides enough support for Johnson Matthey shares to trigger a retest of early 2011 highs. | Stock | Johnson Matthey |
| Nightmare Scenario | The guidance hike is seen as being too marginal to warrant any further positive re-rating of the shares. | Epic Code | JMAT |
| Price Target | 2,000p | Year High | 2,100p |
| Stop Loss | 1,844p | Year Low | 1,460p |
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Source: Galvan Research and Trading
