BAL Margin contraction

When Bellamy’s last reported in February that H1 revenue came in at $173.9m, the commentary at the time suggested FY18 revenue would show 30%-35% growth.

Bellamy’s is reporting tomorrow, these are the numbers that traders will be watching, along with the EBITDA number expected to be 20%-23% of revenue.

During the first half of 2018 Bellamy’s have made several statements about raising the volume of milk available for processing. On 21^st February, Bellamy’s Australia announced three new arrangements to raise its volume of Australian organic milk used in the production of infant formula products.

The formula supplier signed an agreement with the Australian unit of Fonterra, New Zealand, to develop an organic milk pool in Tasmania by working with local farmers. The other two arrangements are with an affiliate of Australian Consolidated Milk and Tatura Milk Industries Limited, Bellamy's said in a statement.

The price charts tell a very different story, with a significant Weekly decline from the outside range (OPd) set in late March marking the $22 highs. The following price decline over the past 5 months has been quiet decisive with only a small consolidation during May – June at the $16.00 level, before a decisive breakdown into the current $9.0 support level.
Last week the price candle made a $10.90 high as buyers entered the market, but this has failed to follow through.
Further detail into the price action can be seen in the Daily chart below.

The Daily chart of BAL shows an important “first break” of price over the rejection high set on the 23^rd of August, this price level again found the sellers. However it should be noted that lower prices did not follow through, with the higher close candle yesterday.
A potential price base is forming in BAL with a buy point set at $10.90 and the associated Stop Loss set at $8.70 (and below the current $9.00 support level), a break of this level would offer the short trade position in line with the current primary trend and would use the $10.90 level as the Stop loss.
The Relative strength Indicator has swung higher, but still resides below the key 50 level, this swing higher does indicate that positive price momentum is underway.

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