Blackmores has had a wild ride over the past few days as traders have reassessed the stock on news of Chinese tax changes. CEO Christine Holgate told Business Insider from China yesterday that the changes have not had an impact on business.
“I haven’t seen or have any reason to believe that anything on the regulation that came out last week would not be good news for Blackmores,” she said.
Yet shareholders saw the stock drop from a high of $204.87 last Friday to a low this week of $144. They are back at $166.87 today.
Given the variability in prices seemed difficult to justify on the fundamentals we asked Ric Spooner, CMC’s chief market analyst in Sydney, if he could give us a road map for Blackmores shares.
A combination of uncertainty and high valuations created extreme volatility in milk powder and infant formula stocks yesterday. As has been long expected, China has moved to regulate and tax products imported via the cross border e-commerce channel. This was a significant source of growth for companies like Blackmore’s.
At this stage, there is still considerable uncertainty about whether or not some products are approved for sale via this channel. Greater certainty is expected over coming weeks but on a worst case basis this could have a negative although far from terminal impact on revenue growth prospects .
After a 15% trading range yesterday, there now look to be 2 key points on the Blackmore’s chart. The first is the gap above yesterday’s high, between $170.44 and $176. A quick move to fill this including a break back above the 50 day moving average would be a positive, at least for the short term.
The second area of chart interest is potential long term support right down at around $133-$137. This picks up the long term trend line; the 61.8% Fibonacci retracement and a harmonic AB=CD level. If things stay nervous and volatile, potential buyers might just get a crack at this level.
And the chart: