Editor’s note: This article was first published in August 2013, and its technical analysis describes FCC at that time: the 14-euro resistance, the earlier trading below 10 euros, the 7–8 euro all-time lows and the divestment and debt-reduction plan. FCC’s share price, debt and shareholder structure changed substantially afterwards. These trading levels date from August 2013 and are kept as a historical record. They are not investment advice.
After the spectacular rise FCC (the Spanish construction and services group) has racked up, we should not forget that the stock is still in a long-term downtrend channel whose upper boundary (and therefore resistance) lies around 14 euros. As we have seen, that is exactly where the rally has stalled, and trading volume has fallen during the latest gains.
It is true that if the stock broke through the top of the downtrend channel, it could head towards 17 euros and then 19 euros. For now that scenario makes no sense, considering that even at 14 euros FCC would be seriously overvalued on fundamentals, without even looking at its current accounts.
The market is welcoming its divestment process and asset sales, money that would flow into the company’s coffers and considerably reduce its debt. A more doubtful matter is how its business will grow in the medium to long term once those divestments are done.
On a risk/reward basis, I would not buy at current prices. Those who did not get in when it was trading below 10 euros might have their chance at 11.90–12 euros. That is not a reliable safety zone, but it is where the stock met resistance in the past, so it could now act as support. If that support were lost, the stock could drop back below 10 euros and even to the 7–8 euro area, where its all-time lows are.
In short, FCC is a train that has already left (and has probably reached the station). The risk would not be worth it even if it broke above 14 euros, because if the IBEX ran into trouble, FCC’s fall could be brutal.
Featured image: FCCGroup, CC BY-SA 4.0, via Wikimedia Commons.
