I like the idea of looking at companies where there is a big disconnect between the technicals and fundamentals, or of course, they are simply disliked. In the case of Avanti Communications (LON:AVN) we have been warned for some time “Houston, we have a problem.”
Even though the recent history of Avanti Comms has not been quite as bad as the doomsters promised us, it has not been much better either. It is frankly rather difficult to understand how in an age of seemingly booming satellite communications, this company has not been able to flourish. Instead, we still have the group struggling with its HYLAS 4 satellite. The “cure” is supposed to be the latest $242m funding. One hopes this will be enough – and be the last!
If it is we have a possible reversal underway on the daily chart. This takes the form of a bullish falling wedge breakout which comes off the back of what is effectively a multiple floor for the shares post July around the 20p level. The message now is that at least while above the 50 day moving average at 23.79p we should be treated to at least an interim rally of perhaps a significant dimension.
The favoured destination is a rebound back towards the post September 40p resistance and heading up towards the 200 day moving average at 51p, even if the stock fails again. Once again, given the history of the stock one would be encouraged to strictly enforce stop losses below 20p, as any loss of this zone could signal a painful and lasting sell off.