Myer Holdings Limited

Myer Holdings Limited (MYR) is Australia’s largest retail chain, with outlet stores in all capital cities except Darwin, as well as in suburbs and certain regional towns and cities. The company’s in-store consumer merchandise lines include clothing, shoes, accessories, cosmetics, toys, groceries, housewares, etc., but also offers online shopping and selected financial products, such as credit cards and in time insurance, as well.

The company has a century-long history dating back to a family-owned mercantile in Bendigo, Victoria. Its expansion over the decades included buying out other retail chains, including Grace Brothers and GJ Coles & Coy, as well as developing new properties. But in 2006, Myer demerged from Coles, was divested, and sold to a consortium controlled by a U.S. private equity group known as Texas Pacific.

The new owners have repositioned Myer amongst the retail industry sector and returned the chain to profitability. It was floated on the ASX on 2 November 2009, and promptly sank over the next six months to its historic low of 2.86 on 21 May. From there it has trended higher as global economic and domestic consumer sentiments have improved the retail outlook, but it hasn’t returned to its float level and its historic high is 3.98.

As a relatively new listing, the stock MYR has almost no chart history and little for technical analysts to analyse. However, it has formed and completed an inverted or upside-down head and shoulders pattern, as shown on the chart, below:

The inverted head and shoulders is a bottoming reversal pattern:
•    It occurs during a downtrend, with the head forming as the lowest point in the decline and the shoulders two reaction lows on either side.
•    The neckline is the line drawn across the two “armpits,” which are the highest points reached by the retracements that form the two shoulders.
•    The target price or measured move is the distance from the lowest point of the head to the neckline, as measured from the point where the price action breaks above the neckline.

On the MYR chart, above, the neckline of the inverted head and shoulders is level at roughly 3.30. Above that, at 3.40, is a strong support-resistance level. The measured move, from the head’s low at 2.86 to the neckline at 3.30, equals an expected move of 0.44 and a target price of 3.74.

The price action has broken above the resistance level at 3.40 and as support it is holding. The gap previously left, between 3.50 and 3.40, has been filled in by the rise above resistance. If the inverted head and shoulders does play to its target price, traders should watch for the price action to rise above the gap level and keep going.

technical analysis by Craig Liles