Tenaris (NYSE: TS) Descending Triangle Inside a Symmetrical Triangle. What does this mean?
Tenaris S.A. (NYSE:TS) is a leading global manufacturer and supplier of tubular products and services used in the drilling, completion and production of oil and gas and a leading supplier of tubular products and services used in process and power plants and in specialized industrial and automotive applications.
Tenaris, scheduled to report its third quarter results early next month, announced solid second-quarter numbers in August. Earnings per ADS reached 80 cents, beating the consensus by about 2.6%. Net sales advanced by 12% to $1.96 billion. In addition, Tenaris announced in June a plan to acquire Maverick Tube Corporation in a deal valued at $3.19 billion. Due to this upward momentum from analysts, Tenaris is a Zacks #1 (Strong Buy) Rank stock.
So why am I so cautious about this stock?
When I look at the stock and industry as a whole, I propose a different, not so optimistic outlook for the short term. The stock has seen a tremendous run-up, followed by the formation of the current base spanning just over 5 months now. Now is usually the time (around the 6 month mark) that a stock will decide it is going higher or lower from bases like this.
Fundamentally the stock is solid all the way around. It looks really good on paper. Technically you can see Tenaris has recently formed a descending triangle inside a symmetrical triangle. As this important time (next 2 weeks here) for TS nears, the industry which TS is belongs (Capital Goods/Construction Supplies and Fixtures - .CSF) has seen a sudden sell off from institutions from Late November to now.
This institutional selling, combined with the descending triangle outline above, could prove to be the negative energy needed to propel the stock to breakout lower from its current base. I usually do not like to short companies with solid fundamentals like Tenaris (TS) but I think here the odds in the short term might be stacked against them.
What do you think?