HLF.ASX Moving Average Ribbon Crossover: Price Breakout
Moving average ribbons are a series of moving averages (MA) of different lengths that are plotted on the same chart to create a ribbon-like indicator.
Traders can determine the strength of a trend by looking at the distance between the moving averages, as well as identify key areas of support or resistance by looking at the price in relation to the ribbon. The ribbons can also be used to signal potential trend changes when the price moves through the ribbons, or the ribbons cross each other.
In this case, after an extended period of sideways movement (consolidation), HLF appears to be completing a "pothole setup" and breaking out. When the price is above the MA ribbon, and the MAs are angled upwards, it helps confirm a rising price. I believe we are about to see this breakout.
This is confirmed with FA action (clearance of the overhang from James Gong and Vivienne Cheung and a record quarter, which highlighted the crossover into profitability). I've been quietly building a position across the past 6 months anticipating this breakout and a rerate back to a fair valuation.
Should run quickly back to 22.5c (purple line) as a starting point on fundamentals, now that the overhang is cleared and the pivot point in profitability has been hit. With 274M SOI, 22.5c is a market cap of A$61M. That's a 12x multiple of est. FY23 EBITDA of A$5M (ASX F&B sector trades on 15-20x EBITDA on average) and 0.87x Q3-FY22 run-rate revenue (A$70M).
Traders can determine the strength of a trend by looking at the distance between the moving averages, as well as identify key areas of support or resistance by looking at the price in relation to the ribbon. The ribbons can also be used to signal potential trend changes when the price moves through the ribbons, or the ribbons cross each other.
In this case, after an extended period of sideways movement (consolidation), HLF appears to be completing a "pothole setup" and breaking out. When the price is above the MA ribbon, and the MAs are angled upwards, it helps confirm a rising price. I believe we are about to see this breakout.
This is confirmed with FA action (clearance of the overhang from James Gong and Vivienne Cheung and a record quarter, which highlighted the crossover into profitability). I've been quietly building a position across the past 6 months anticipating this breakout and a rerate back to a fair valuation.
Should run quickly back to 22.5c (purple line) as a starting point on fundamentals, now that the overhang is cleared and the pivot point in profitability has been hit. With 274M SOI, 22.5c is a market cap of A$61M. That's a 12x multiple of est. FY23 EBITDA of A$5M (ASX F&B sector trades on 15-20x EBITDA on average) and 0.87x Q3-FY22 run-rate revenue (A$70M).