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Shine through a technical analysis lens
Shine Justice Ltd (ASX: SHJ) provides legal and insurance recovery consulting services in Australia and New Zealand. The company operates through 56 branches and has two segments, Personal Injury and New Practice Areas. Technical analysts believe that nothing can tell the story of a stock better than its share price chart. So, let’s have a look at the chart of Shine Justice and see what happened in the last two years.
❶ After a market-wide recovery from the pandemic lows, shares of Shine Justice started to slip due to fears courts would shut down and the impact of that on Shine’s business.
❷ Shine Justice announces its financial year 2020 annual results and shows its business resilience despite the pandemic wreaking havoc. The company reports growth in both revenues and profits and decides to keep paying dividends (4.6% at the current share price level of $1.30), evidence of confidence in the future performance of the company.
❸ The blue horizontal line shows the pre-pandemic all time high price level. The share price makes a strong breakout on the back of a strong financial year 2021 results and a positive outlook by management.
Overall, the primary uptrend in the share price confirms the successful story of Shine Justice and one of an expanding business, as shown in its financial results.
The stock needs to consolidate at current levels before it can head higher
Technically speaking, trendlines with slopes of around 30 degrees are generally stable and reliable. As such, divergences from these trendline are expected to be unstable and correct themselves towards the trendline. This can happen by price corrections or time corrections. A time correction is likely to be the case for Shine Justice. In technical analysis a “time correction” means the stock will trade in the current price range in the near term until it reaches the trendline, which is expected late March.
Can Shine Justice shine again?
Using the Fibonacci retracement levels shown in the chart, the range that Shine’s shares are expected to trade in is approximately $1.30 to $1.50.
The trendline itself then can be used as a stoploss level. This is because a break of the trendline at the very minimum signals a pause in the growth of the business. On this basis, entries at or near the trendline are the best as they provide the highest risk-reward ratios.
Additionally, the current EV/EBITDA multiple for FY23, which starts in five months, is only 4x. Not bad for a stock expected to grow its EBITDA by 7% next year.
$1.30 seems a good price to get in
If you’re suffering from FOMO, buying at the bottom of the trading range right now, i.e. around $1.30, can still make sense. Just be sure to put in a stop-loss that coincides with the rising trend line and manage it actively.
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Frequently Asked Questions about Shine Justice
- Is Shine Justice an Australian company?
Yes, the company is headquartered in Brisbane, QLD, but also operates in New Zealand.
- What does Shine Justice do?
Well, to put it simply, they are ambulance chasers. The help their clients with litigation, such as class actions and injury claims.
- Does Shine Justice pay a dividend?
Yes, the company paid a 5 cent dividend over the FY21 financial year and is expected to pay 6 cents for the current financial year.
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