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Incitec Pivot finding support

IPL looks to have found some support after a very troublesome year.

The stock is down 25% year-to-date as phosphate exports to the sub-continent were cut in half due to local governments cutting subsidies as seasonal issues in the Americas have made global supply sluggish.

IPL has always relied on its explosive business for stable revenue; however with the downgrade to capex from major clients, that sector has also experienced a sluggish 2013 and led to downgrades in forward guidance.

However, with nearest rival Orica seeing a pickup in forward orders and IPL seeing a return in demand later in the year, the stock has finally found a floor and bounced.

The trade

Since its earnings update in November, which reiterated FY13 was to be a sluggish one, IPL has followed its bottom Bollinger band to a four-year low. However, support as finally been found at $2.30 and on current momentum IPL looks to be heading back toward the 20-day moving average.

I would be looking to buy at market with a stop loss at $2.34 (which is the bottom band and where the bounce started). Look for IPL to return to the 20-moving average ($2.56) and if it passes through this level place a limit on the trade at $2.75; which is two standard deviations away from the 20-day moving average.

This is a speculative buy call so be nimble and aware of any market update that could drag on the current bounce. However, if the current environment is maintained it is likely that IPL will see upside trading in the short term.

IPL finding support

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