AMGO stock analysis: the stock may be getting ready for a launch higher

The AMGO share price analysis suggests the stock could be ready to start a new uptrend in the next few days

British guarantor lender Amigo Holdings Plc (LSE: AMGO) has been struggling in the past few months. In the nine months to the end of 2020, the company reported a 33 per cent drop in the number of customers to 156,000 from 232,100 a year before. 

The loan book plummeted 43 per cent year on year to £412.2m. Amigo attributed the drop in performance to the Covid-19-related payment holidays it had to extend to about 63,000 customers by the end of January 2021.

Along with the operational problems, the company also got hit by a huge number of complaints to the Financial Ombudsman. Between October and December 2020, the Ombudsman received 10,321 complaints against Amigo while in the same quarter of the previous year, the complaints were 303.

Among all the negative news, there was a ray of hope for the company when Britain's High Court approved Amigo’s plans to cut compensation payouts to customers. The proposal will now be put to customers’ vote on May 12. According to Amigo, failure to approve the scheme could result in insolvency.

Even amid the negative developments, JPMorgan announced a 5.2 per cent stake on February 24 and then increased the holdings to about 7 per cent. The investment by JPMorgan could have given confidence to the traders that AMGO’s share price could rise in the future. 

While the fundamentals look murky, do the technicals point to a rally in the future? Let’s perform the AMGO stock analysis of the weekly chart to find out.

AMGO share price technical analysis: weekly chart

The AMGO Holding share price has lost about 95 per cent of value since its all-time high of 314.95 pence on July 3, 2018. This shows that the long-term trend favours the bears.

However, since hitting an all-time low of 4.84 pence on July 1, 2020, the stock has been attempting to form a bottom. A long basing pattern provides a launchpad for the stock to start its recovery.

The relative strength index (RSI) has gradually been moving higher, indicating that the bulls are attempting to make a comeback.

The AMGO share price analysis of the weekly chart shows the long-term trend is down but the bulls are trying to form a bottom. Let’s perform the AMGO stock price analysis of the daily chart to spot the critical resistance levels on the upside.

AMGO share price technical analysis: daily chart

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The stock has made a couple of sharp moves to the upside in the past few days but the bulls have not been able to sustain the rallies. This suggests that traders who may be stuck at higher levels are selling their positions on every up-move. 

However, the upsloping moving averages and the RSI in the positive territory suggest the bulls have the upper hand.

If the buyers can drive the price above the downtrend line and the overhead resistance at 20.25 pence, the stock could start a new uptrend. 

The first target objective on the upside is 35 pence. If the bulls can propel the price above this resistance, the uptrend could continue and reach the next resistance at 50 pence.  

Contrary to this assumption, if the stock turns down and breaks below the 20-day EMA, it will suggest that the bullish momentum is weakening. A break below the 50-day SMA could result in a decline to 10 pence.

AMGO stock: buy or sell at these levels?

The AMGO share price analysis shows a bottoming formation. Traders could consider buying the stock on a breakout and close above 21 pence. The initial stop-loss could be kept just below the 20-day EMA. The stops could be trailed higher as the price moves up.

Another possibility could open up if the price rebounds off the support of the range at 5.15 pence. The stop-loss for this trade could be kept just below the all-time low.

 

Trade AMGO: AMGO shares price

Amigo Holdings PLC
Daily change
0.0435
Low: 0.042
High: 0.0435

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