Aristocrat – Time to Roll the Dice

Aristocrat – Time to Roll the Dice

Shares in Aristocrat Leisure Ltd have come a long way – from a pre-GFC high at $17.68 to a low in December 2010 at $2.52. The falls over the last six months relate to a profit warning in November, confirmed at the February full year results presentation.

Aristocrat is the share many traders love to hate – falling earnings and missed management targets have made it a favoured “short”. In my opinion, part of the sharp upward move post the February announcement was caused by traders buying back short positions.

Importantly, Aristocrat management flagged their view that after two years of falling profitability, the outlook for the next year is a profit increase of 5-10%. This could mean that analysts start revising their earnings estimates, and upward earnings adjustments are considered one of the most reliable indicators of share price rises.

The share price has been in an up channel since late November. On Friday it respected a recent support level at $3.14 (briefly trading at $3.13) - see the chart daily below.

Source: Bloomberg


The short momentum indicator, while not high in absolute terms, is crossing its moving average. While traders will use their favoured methods and indicators to decide if this is the right trade, for me it’s time to “roll the dice”.

Possible trading levels:

1)      Buy ALL at opening levels today (up to $3.25) Stop loss at $3.11, first target $3.55

2)      Buy ALL on any pullback to $3.16, stop loss at $3.09, first target $3.55

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