JayanVarsani

ASTON MARTIN - REVERSAL ZONE? LONG-TERM INVESTMENT OPPORTUNITY

Long
LSE:AML   ASTON MARTIN LAGONDA GLOBAL HOLDINGS PLC ORD GBP0.10
Aston Martin has been on a steep and vigorous decline since its IPO. Could Aston Martin turn things around from here and start reversing from current prices?

Aston Martin has recently announced involvement in F1 with Racing Point rebranded as Aston Martin. This could help in turning things around. Billionaire Lawrence Stroll has clear intentions to do so and has invested into the company with a £260mil injection. Toto Wolff, Mercedes F1 team-principal has also bought a stake in Aston Martin. This indicates a large force and urgency to turn the Aston Martin brand around, stabilise the business and clean the balance sheet .

With the share price being significantly devalued and oversold and the falling wedge breakout, it could be an opportunity to invest long and short-term. Short-term in the sense that the stock is highly volatile meaning returns (and losses) are seen much quicker.

However, as the business model and balance sheet , as of now, is very unappealing, unstable and risky, the clear down-trend might still be in play and the current equilibrium triangle pattern maybe a consolidation phase before breaking lower in continuation.

4 things can happen here:
  • Equilibrium breakout upwards and a reversal
  • Equilibrium breakout downwards and a continuation
  • Equilibrium breakout downwards and a double bottom
  • Delayed Range-bound consolidation sideways

VERDICT: The trades/investments above should be played in accordance with your style and risk-tolerance since, given the volatility of this stock, there is high risk. Since the chart is in a clear down-trend, the balance sheet isn't yet appealing and macro-economic factors such as covid, bull calls are more risky than bear so do your own due diligence and manage risk appropriately.

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