Admiral Group (first half results 16 August)
Admiral shares had a strong start to the month after peer Direct Line reported a strong 9.5% rise in first-half profit due to rising auto insurance premiums. Premiums are rising again after several years of being flat or even falling. The average price of UK motor insurance hit a record high in the second quarter of the year, driven by new rules for personal injury claims and a rise in the insurance premium tax, the Association of British Insurers said last month. However, the good news may now be priced into Admiral’s shares, and a weaker-than-expected performance could undermine the gains made so far this month.
Admiral shares have broken higher from a three-month period of consolidation, with the price subsequently coming back to test £21.28 as new found support. Keep an eye out for this area to potentially hold to push the price higher once more. Ultimately we are trending upwards and there is a strong likeliness that we will see further gains to come. A break below £21.28 would point towards a retracement of the rally from £19.77, yet it would take a break below that level to make the longer term picture bearish. Until then whether we break higher, or retrace first, a bullish outlook remains in play.
Hikma Pharmaceuticals (first half results 17 August)
After a strong start to the year thanks to positive news on approvals, licenses and new product launches, Hikma’s shares have been in a downtrend since last March. That started after JP Morgan downgraded the stock due to concerns that Hikma’s planned new generic rival to GlaxoSmithKline asthma blockbuster Advair would only give a temporary earnings boost because of price deflation and competition. The pain was compounded in May when the US Food and Drug Administration (FDA) didn’t approve its asthma drug application and Hikma admitted approval was unlikely this year. Earlier this month Morgan Stanley downgraded the stock to ‘equalweight’ from ‘overweight’ citing deflationary headwinds in the company's generics division and increasing competition in injectables. Hikma appears to have some work to do to convince investors about its growth potential. An update on the asthma drug situation may help, but the company may not be in a position to provide this yet.
The downtrend evident over recent months has continued apace recently, with a strong move lower on Tuesday leading to the lowest level since early 2014. This is expected to continue as long as the price does not break back up through £14.57. Any extended rebound would bring the 50-day simple moving average (SMA) and trendline resistance into play once more.
