While in the short-term NEU may be subject to some degree of...

While in the short-term NEU may be subject to some degree of unpredictable ‘price management’, as an investor rather than trader I prefer to base decisions on share price movements in a longer-term context. Over a period of years temporary market influences and investor mood swings lose significance, and fundamental growth in the underlying business becomes the primary driver of share price growth.

The chart setup below (weekly data, log scale) allows an analysis of NEU’s historical price movements over the last four years in relevance to its current and possible future pricing.



Ethics approval in November 2020 to commence the first Phase2 NNZ-2591 trial saw NEU’s SP move into what would become a well-defined trend channel growing at a compound rate of 166% p.a. over the following three years. Plotted on a log scale this rate of exponential growth is represented by the set of upwardly inclined straight lines shown on the chart.

The trend channel may be thought of as an inclined trading range with its lower and upper boundaries functioning as primary limits of support and resistance, respectively. Within those boundaries three other parallel lines (grey) can be seen to have served as general levels of support or resistance for medium-term price movements.

The width of the channel corresponds neatly to the $1.69-$4.04 price range for the week ending 10th December 2021, with a factor of x 2.4 between lower and upper boundary values. Positive top-line results for the pivotal Rett Phase3 trial were reported in that week.

Results for the PMS Phase2 trial anticipated next month also are considered pivotal, and this no doubt has been a contributor to recent rises away from the $10.02 primary base. The current price nonetheless still remains in the lower regions of the trend channel. The medium-term momentum indicators confirm this movement towards fair value away from highly undervalued levels near the channel base.

While the fundamental driver of this growth rate remains in force it is possible to project forward potential price targets. For example, the terminal line positions shown, calculated for 2^nd January 2024, are: (A) $12.52, (B) $15.54 and (C) $19.37. The value calculated for the upper boundary of the trend channel is $30.02 on that date.

Companies whose share prices grow by 166% each year are not too common on the ASX, and as an investor I hope that NEU is given the chance to continue along at that rate of growth for several more years before an attractive buy-out becomes inevitable. And then, at a price well above its trend channel at the time.

All IMO