Forum Archive Index - October 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Phaedrus,


Thanks for your comments.  It's always good get get a perspective 
from the 'other side of the fence' (technical). 


>
>
>A prominent feature of this stock is the strong longterm resistance
>at $1.90. This level has not been broken in nearly 5 years. It
> would take some remarkably good news, a major change in
>fundamentals or a big shift in market sentiment to break this
> barrier. This stock will have hundreds of holders looking to
>realise profits (or minimise losses!) should it get back near
>$1.90. This is how support/resistance levels are maintained, and
>why they work.
>
>

I know you tell us that there is no need to explain charts, you just 
take them as they are.  But I thought I'd explain it anyway.  

As 'Winner' has alluded to, LPC has a habit of paying out special 
dividends if they start to build up too much shareholder equity.  
Effectively they keep cutting down their capital base when it reaches 
a certain level.  Because the LPC shareholder capital isn't allowed 
to increase in the long term, neither can their earnings and so 
neither can their share price.  Hence this 'share price ceiling' of 
$1.90.


>
> 
>I would guess that you are looking at LPC as an income share 
>- yes?
>
>

Yes, although income shares that manage a sustained growth in income 
often leads to share price growth that is a by product of income 
growth.

>
>
>Longterm, LPC is tracking sideways, so while there is limited
>downside risk, there is also limited upside potential. For all
>that, 
>
>

Sure but if it ever gets back to that $1.90, that is still a 30% 
premium to my 'buy in' price - a return not to be passed over in 
today's market!

>
>
>I believe your entry at $1.46 will be a good one for you
>(albeit technically premature!) Furthermore, I would not be 
>at all surprised if the $1.43 support level held. I would be 
>very surprised if the support at $1.35 was broken.
> 
>      

I know your chart doesn't show dividend payments, but that $1.43
level has already been breached and bounced off if you take into 
account the 7.5c dividend that LPC went ex last Friday.

Interestingly, when I phoned the buy order through to my broker he 
said to me:

"Hey, you do realise you would have been better to buy in last 
Friday."

"Yes", I told him, "But I hadn't finished doing my homework then!"

I managed to rationalise my non optimal buy in price.  If I had 
bought last Friday it would have been 'riskier' as I would have been 
buying in without the knowledge of the technical bounce that happened 
on Monday.   Must stop rambling.  I'm starting to sound like a 
chartist ;-)

SNOOPY



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