Editor’s note: This article was first published in May 2014; the share prices, technical support levels and price targets, and company details such as its losses, Latin American expansion and capital restructuring are from that time. The company’s situation has changed considerably since. This is the author’s personal trading diary from May 2014, kept as a historical record. It is not investment advice.
Ezentis’s technical picture has become considerably more complicated. Since reaching its high around €2, it has been making lower highs. It has lost all its key supports, given that it fell below €1.17, probably the last level that seemed to be acting as support.
It is now trading below both its 200-session and 50-session moving averages and, as if that were not enough, the moving-average crossover that sent the stock higher has now crossed back the other way. That leaves the psychological €1 level as our last hope, and it was almost lost at today’s close. If the stock falls below its last low at €0.97, it could go into free fall down to who knows where, with the only reference point between €0.50 and €0.60.
Given this situation, it is clear that we will have to make decisions over the next few sessions.
But first I want to remind you of something most of you will remember. We bought Ezentis several times, at €0.115, €0.13, €0.14 and €0.17. Our average purchase price per share is €0.143, which would be about €0.57 today, and we went in when nobody was advising it. Later I averaged in at around €1.09.
When Ezentis reached €1.70, many analysts started recommending it, so anyone who bought at that price level should already have acted on their decision.
What I mean is that right now I have no idea what the stock is going to do, although it will most likely collapse, especially given the attack this company is suffering once again, so for anyone not yet in the stock there may be a buying opportunity. Those who are in with gains will have to make their own decision on whether to hold and wait or to sell ahead of the likely fall, always knowing that the big drop could come, or it might not. Technically, the most likely moment for it is after today’s close.
Ezentis on fundamentals
As I have said before, in my view the dead weight on Ezentis is called Vértice 360, a company I still do not understand why they have not got rid of, as I see no chance of it recovering.
Ezentis is a company in the middle of an expansion process and its finances are getting healthier, despite having doubled its annual losses. In the long term, the investment in Latin America will pay off (it should pay off). García Durán believes he could soon get the company back into the black.
New capital increases through the “accordion operation” (a capital reduction followed by a capital increase) approved by the shareholders’ meeting will probably be punished by the market in the short term because of the doubts they raise, but I still think that in the long term Ezentis will meet the expectations that led me to invest heavily in this company.
So, do we stay in or get out given the likely bearish scenario expected in the short term?
Personally, I still have some room to avoid making hasty decisions, although I would not like to turn gains into losses or give back a large part of the gains.
I admit it crossed my mind to sell 50% of the shares when it reached €1.80. Today I know that would have been the smartest move, but everything looks different in hindsight. Depending on how the stock behaves over the next 2 days, I will not rule out getting rid of the shares so as not to get caught in a technical drop and still be able to get out with large gains. It is not what I would like to do, because it is exactly the same thing we saw before, and the price of Ezentis will rise again. And while in the short term we do not know how far it will fall, for the long term I still like Ezentis.
Featured image: William Holbrook Beard, Public domain, via Wikimedia Commons.
