Technical analysis
Price | € 20,00 | 52 weeks range | € 18,54 - € 32,85 |
Beta | 1,23 | Volume/ average | 575,000 / 4.9m |
Sector | Consumer discretionary | Dividend | 3,19% |
Industria de Diseño Textil, S.A. is a Spanish multinational clothing company. ITX, or Inditex, is the largest fast fashion group in the world, operates over 7,200 stores in 93 markets around the world
ITX in November 2021 began a long decline that brought the stock to the levels of March 2020. Combining price fluctuations with internal indicators, we believe there is a good chance for a rise in the medium to long term.
Price
Analyzing the current price at € 20.00 we note how the stock is on the narrow € 18.50- € 21.50 range which in the past has played the role of consolidation before bullish stretches, as in 2014, or recovery as happened in March 2020.
Looking at the daily chart we understand how this first price area represents the optimal range in which to monitor the price to prepare for a change of direction.
On the weekly chart, we can instead see how the stock is on a broader bearish channel in existence since 2015: in particular, today the price is on the lower band of this channel, shifting the risk / return more in favor of an increase and reaching the upper range, rather than a break to the downside of such a well-established channel over time.
In addition, analyzing the price from a “Volume Profile” point of view, we note how the current range represents the point of maximum concentration (POC) from 2012 to today.
Indicators
Looking at the MACD and RSI indicators: both show a positive divergence with the price fluctuation on the daily chart.
On the weekly chart we can see how the RSI has reached the oversold area: an event that has only happened 3 times from 2013 to today. In all these cases, we then witnessed significant price increases in the medium to long term.
Moving averages
The moving averages that we take into consideration for Inditex are the 9 (red), 50 (yellow) and 200 (green) days.
The first (9 days) on the daily chart allows us to understand how this has played the role of moving resistance: it is in fact since November 2021 that the price continues to remain below it. An initial overcoming would confirm a possible change of direction.
The 50-day average on the daily chart gives us a good indication of the current trend which is confirmed to be downward.
On the weekly chart, the strong distance between price and average makes us understand even more the strong oversold situation and support the thesis of a possible recovery of vigor (and reunification with the latter).
Finally, the 200-day average gives us a first conservative medium-term target.
Conclusions
At the current price, we believe that ITX is a very interesting stock to monitor and to enter only at subsequent price confirmations.
The current price makes the probability of possible increases greater than decreases despite the stock being in a bearish channel. The numerous points of contact between the price and the channel make the latter very usual and the price fluctuation more regular.
The price confirmation we have identified consists in breaking the 9-day average, moving resistance since November 2021.
Subsequently, a break of the 50-day average could represent an excellent opportunity to increase exposure to the title.
We believe the proposed targets to be conservative: the first at a level just below the 200-day average and the second just below the previous highs.
Stop loss identified through the study of the "Volume Profile": the absence of volumes after this level represents the last barrier before a quick decline to € 13-14.00.
Entry range € 21.00 - € 22.00
Target 1 € 27.00
Target 2 € 30.00
Stop loss € 17.50
Graphs
OTB Global Investments
8 April 2022
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