Editor’s note: This article was first published in February 2013 as short-term technical analysis. The price levels (€100, €95, €85 and €70) and IBEX 35 levels (7,500 to 9,000 points) are long out of date, and the share prices predate Inditex’s 2014 stock split.
In three years, Inditex shares have gained more than 150%. Specifically, from June 2012 until the end of December, the stock moved within a very steep uptrend channel, showing the best technical picture a stock can have: trading at all-time highs with no resistance overhead. However, if we look only at the technical side of the “Spanish Apple”, it doesn’t look very good, because Inditex has already broken below the lower edge of that uptrend channel.
This could be a mere market correction before the stock resumes its climb, although it is starting to form a small downtrend channel, with lower highs and lower lows. If Inditex loses €100, it could become “cannon fodder” for the bears. And if it ends up losing €95, the correction could extend down to €85. Although unlikely given the kind of company we are talking about, with help from the bears it could even head towards the €70 area, though that scenario wouldn’t make sense.
This brings us to another issue: Inditex carries a lot of weight in the IBEX, as does Telefónica. If the correction does happen, and Telefónica stays stuck, as do Repsol and Santander, the IBEX will struggle to climb above 8,500 points, and we shouldn’t rule out it losing 8,000 points again in the short term, or even revisiting 7,500. Even so, for some reason, most analysts are confident that the IBEX has a target of around 9,000 points.
In Inditex’s case, if the correction extends, it could be an excellent opportunity to add the stock to your portfolio, since the picture we are drawing is purely technical and short-term. For the long term, and on fundamentals, Inditex is an excellent company.
Featured image: Nacho, Public domain, via Wikimedia Commons.
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