Should You Buy Mayne Pharma Group At This Share Price?

What happened to the MYX share price?

Mayne Pharma Group Ltd [ASX:MYX] has been a strong performer in the last few years. Its share price went from only 20 cents a few years ago to more than $1.2 in 2015. Now, it has corrected to above $1 a share and is on a rally momentum.

Technical analysis

Today, I am going to do something that I usually avoid doing — technical analysis. When I attended my classes in security analysis, my lecturer referred to technical analysis as ‘witchcraft’.

To me, there is nothing wrong with ‘witchcraft’ if it works. This is especially the case when a number of quantitative trading methods utilise indicators from the technical realm. So there is some validity in this style of analysis.

Relative strength shows MYX was oversold in the last correction. It is now making a strong come back. The rally is not yet in the overbought territory, meaning it can potentially continue to rally.

Bollinger Bands analysis shows its current rally has been a very sudden event. Its correction was equally sharp, and now the rally is pushing its price to the upper bound of the Bollinger Bands. To me, this means investors need to be careful with the rally in the next period. Although the rally can continue, it may stop very unexpectedly.

What should you do with MYX shares now?

On the fundamental note, MYX is by no means a cheap stock. It has a P/E of more than 36 times. However, it has been a return on equity of 10.74% and a return on asset of 5.47%. These figures show that the company has healthy financials. This happens to be the reason for its price appreciation over the years.

Although MYX is a profitable asset to trade, it is a relatively volatile asset. A well-hedged strategy is recommended. A leverage level of no more than two times is advised.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day - and tell you how to profit from it. We know the best investments are often the hardest to find. So that's why we sift through mountains of reporting, research and data on your behalf, to present you with only the worthwhile opportunities to invest in.

Become a more informed, enlightened and profitable investor today - by taking out your free subscription to Money Morning now.

Money Morning Australia