Weekly Blog 16 April 2021

With the market making a steady 1.0% gain for the week, all was once again well with the world. Patterns are again moving price up as charting theory suggests - something that didn’t reliably happen in the sideways market previously in force since the start of the year. For example, my Stocks to Watch picks have not lived up to expectation for several weeks now, but this week they rose 3.3% on average, with MYX up 20%.

With my Stocks to Watch page there were a number of new contenders for listing (BKL, EMV, MVP, WPL) who all exhibited strong patterns suggesting short term growth. None of my existing listings warranted removal and, wanting to keep the list to a manageable size, I included only EMV and MVP – but readers might want to have a look at BKL and WPL.

My own trades moved up 1.5%. I sold SLR which had risen some 20% since I first bought in as it started to fall back from the top of a price channel. I also bought into EMV and MVP which are mentioned in my comments above.

My educational portfolio of long-term trades pushed ahead another 1.5% and is now up an annualised 35% since being started in November. It’s been an interesting exercise running a textbook trading program and its has made me question some aspects of my own more short term opportunistic pattern trades, in what has been a trying market. In an endeavour to de-risk my portfolio, given we are now approaching a significant market top (which is likely to be followed by a material correction), I am generally only buying stocks that are coming off significant lows showing strong buy patterns. I’m also adopting the same trendline and higher weekly low stop loss policy as my educational trade examples – ie I’m buying more conservatively and not closing out trades at the first sign of a pullback (unless they have already risen strongly – like PLS mentioned above).

Next week’s outlook seems positive based on the usual drivers, but with the XAO having had 4 higher weeks, a down week or two has become quite likely given the XAO rarely has runs of more than 4 weeks. However, given price has been restrained since the start of the year (think of a stretched rubber band) the pressure to resume climbing higher may see this run extended a little further before a small turn down and a final push to the summit.

Gold remains a concern for me. It fell 0.9% for the week, and while it has closed for 2 weeks above downtrend, which is a buy signal, it still has a reasonable probability of falling around another 7% – 8%. Such a move would see similar falls across the board in gold stocks. Note: I use the EFT GOLD as a proxy for physical gold as that EFT tracks the precious metals price and its chart is more readily available to me via my stock charting software. Incidentally, I use Optuma software which I highly recommend for anyone considering becoming an active trader/investor.

Inflation and its impact on interest rates is seen as the probable catalyst for a future pull-back in the market. That said, the Taiwan issue, should China decide to reclaim it by force, would likely see a fall of Covid proportions. Any confrontation between the US and China would see Australia lining up (reluctantly) behind the US. My hope is that the Chinese, who still need world trade to grow, would see their likely adversaries are also their biggest markets (not forgetting the trillions of dollars invested in the US and its allies which would undoubtably be frozen) – ie the reward doesn’t warrant the risk. More sabre rattling is the most likely scenario – something still likely to unsettle markets.

Weekly Blog - 9 April 2021

My comments re the XAO’s move up last week and what it means for the market were a bit more extensive than usual, can be found on my Stock Commentary page - click here.

The XAO’s 2.7% rise was reflected in my own trades which rose 3.7%. The best performers were SLR (+18%), EVN (+9%) and FPH (+6%). The only stock to fall was SGM (-0.02%). My only transaction for the week was to top up FPH.

Updating my Stocks to Watch proved problematic this week. My picks from last week rose 4.5% on average with SLR the standout performer (up 18%). From 7 new contenders for listing NCM and PLS had the strongest patterns and appear this week. All my prior listings still show potential to rise and none have been deleted. Two stocks that readers might want to look at which almost made the cut were COH and TCL.

The chart of GOLD closed above a downtrend line and assuming next week stays above that level then the chances of GOLD having bottomed and now moving up again are good (but not guaranteed).

One week of good rises is not a rally and investors/traders need to be very cautious about succumbing to FOMO and leaping into what remains a volatile market.

Weekly Blog 2 April 2021

The market is still stuck on ‘repeat’ with no move up or down out of its narrow trading range which saw the XAO close flat for the week (+0.02%). Price has been forming a pennant pattern over the past 2 months and my hope is that price is about to break up out of said pennant. If price breaks above 7110 next week the pennant will be formally confirmed and assuming price closes above last week’s close of 7064, then a break higher becomes more likely than not. Thursday’s candle closed near its high and Wall Street was up along with ASX futures – hopefully setting the scene for a positive start to next week.

Whether you ended in the black or red this week again will have depended on the sectors your portfolio is biased towards and whether it leans towards speculative stock or is more balanced and conservative. As an example, my own holdings were down about 1.5% for the week but the educational balanced portfolio I run as a ‘how to trade’ for students of my material rose by 1.1%.

I sold 50% of my FLT trade during the week as it hadn’t fired as hoped (and showed a potential to fall further). I only sold 50% because I can still see reasons why price could reverse and go higher. I also quit my HLS trade for a lack of performance. Both disposals were break even.

Last week I noted I had bought back a small amount of MYX, being a stock I lost money on earlier in the year. While I have misgivings about buying back into dud trades (because I’m probably just trying to prove I can recover said loss) MYX did spike, jumping 21.4% yesterday. I sold despite the potential for further rises as that jump exceeded my expectations. If it breaks $0.45 it could be worth another flutter.

Despite having seen a few other good patterns I’ve been moving to a less speculative position and am preferring to top up existing trades that are performing, rather than take on new trades that have potential. While my portfolio fell more than the general market, those that did drag my performance down generally seemed to be falling to support levels they could be expected to rise from, and (importantly) none were in danger of breaking stop losses. My trades in travel stocks FLT and WEB moved down, probably due to the Queensland Covid issue. My other travel play, SYD, rose 1.9%, suggesting this sector may still have some potential. WEB fell 7.9% for the week after also making a large convertible notes issue. The debt is convertible to shares at a 22% premium so I’m unsure why that should have had such a negative impact on price. CKF which I decided to hold after it achieved a short term target fell back 6.6% this week to give away most of those gains. In line with my move to de-risk my portfolio I have stuck with CKF because I feel it is just setting itself up for another rally from a level near this week’s lows. The week saw a reversal candle form, suggesting a change of trend is likely – so hopefully next week will see some recovery by CKF. SGM (up 5.5%) and TCL (up 4.2%) were my best performers – other than MYX.

The sluggish market has presented me with a problem in respect of my Stocks to Watch. Rather than (usually) moving after a week or two, my picks more often than not remain glued to the launch pad or fall back. While I expect most of those picks to live up to their promise in time, I’ve decided to revert to only listing stocks I see as having strong charting potential at the time of writing.

Weekly Blog 26 March 2021

The market remains directionless with fund managers and traders waiting for a new trend in price direction to emerge.

This week did show the best weekly result (up 1.4%) since the start of February and (importantly) each day’s trade made a higher high price. In the absence of any news likely to send investors running for the bunkers, I still see the XAO as moving back up to 7360 which would be a new all time high. I’ve had that target on my radar for a few months now and I would expect price to then retrace into a correction towards 6450. Put another way – the market is running on empty.

A correction will set the market up for another rally, but it does mean that speculative stocks, with their share price based on expectation rather than actual performance, will take the biggest hit. BNPL stocks could feature in such a shakeout. I have never been a fan of the BNPL players and with increased competition and little likelihood of them turning a profit any time soon I see their valuations extremely challenged. Z1P which had a peak of $14.53 has collapsed to $7.75 and the charts suggest $6.50 could be a bottom.

Gold looks as if it could finally be turning the corner, having made the best sustained move up since the middle of last year. This month has seen consistent higher troughs and peaks on the daily chart and price has risen to an overhead downtrend which may turn price back down again. If price fails to break higher over the next week or so, there remains the potential for a further fall of 6% - 10%. That said, see my analysis on EVN which suggests gold's bottom is in.

My own trading reflected the general market this week and saw a modest increase of 0.5%, again suggesting the market gains are not being shared equally across sectors. A balanced long-term educational portfolio I’m running showed a gain of 1.25% further supporting the view that in this market the tortoise is doing better than the hare.

This week I bought back into EVN, FPH and MYX as well as topping up HLS and TRS. MYX took some money off me in a trade earlier this year but with the stock having made a buy signal I thought I should try and win some of those losses back (a trading plan I don’t recommend as it never seems to work - but in the case of MYX injured pride got the best of me!).

With my Stocks to Watch I’ve added EVN and FPH. Last week’s list included travel stocks WEB and FLT which took a hammering this week because of suggestions international borders will not open as soon as hoped. The charts still suggest they could move up and my gut feel is that with prices coming off significant lows and the vaccine rollout ramping up, they remain well placed to rise. That said, it is expected in charting that sometimes stocks move back down to retest previous lows before finally breaking higher.

Weekly Blog 19 March 2021

The last several weeks underline why it is hard to make money trading shares in a sideways market. Sure, you can bag the odd prize if Lady Luck smiles on you, or by trading higher risk speculative stocks-  but that comes with some risk as many have found out in this market.

Importantly (for me) is that the XAO’s Friday candle fell right to the lower boundary of my price channel and rose to close near the candle’s middle – offering some hope that (once again) the worlds investors will mull things over this weekend and decide Friday was oversold so they need to buy on Monday.

XAO 19Mar21

Overall, my own trading was down 0.3% for the week which is at least better than the XAO’s 0.73% loss.

I had no major losses and two gains. CUV, which I bought 2 weeks ago, I topped up during last week and then sold for a 9.7% profit. CUV has the potential to go further but I’m expecting a bit of a retracement first. I bought into CFK and then topped it up. Sitting at $11.17 currently, I have a target of $12.40. CFK showed a 19% gain this week, but much of that was before my buy in and my trade is only up 8%. I also topped up SYD, OZL and WEB (all of which repaid me by subsequently falling back). Neither of these stocks made my Stocks to Watch last week because they only confirmed their likely jump in price this week.

I sold ORA when it hit its target but it fell hard and fast and while I made a profit it wasn’t as good as it could have been. I bought in 3 tranches as price rose and while the first 2 tranches were profitable the last was not.

I’ve left my last week’s Stocks to Watch unchanged. While many have moved down with the market they have all retained potential to rise. I was going to add ALG, SVL and BRN – all of which are building patterns that could see good rises (although BRN is quite a volatile stock and a relatively higher risk trade than the other two stocks). However, they all had some question marks hanging over them and in this market it is probably best to do nothing.

Gold has ticked up a bit this week, but I still see it more likely to fall a bit further yet. Using GOLD as a proxy for physical gold that EFT currently has a price of $208.90. I see the possibility of it falling to $200 or perhaps $195. Based on this I don’t believe gold stocks are quite ready to move up consistently.

GOLD 19Mar21

 

Weekly Blog 12 March 2021

Investors seem to be rebalancing their portfolios towards a greater exposure to boring old stocks like banks, oil etc which are doing well at the expense of what have been flavour of the month shares like BNPL, techs (even stocks like CSL). So again, whether you made money this week will depend on whether you have a balanced conservative portfolio, or one that is more speculative. That’s not to say all speculative stocks are bad – just less predictable in this volatile market.

My own trading, which is basically reliant on patterns hasn't shown my usual returns for the past couple of months while the XAO has been drifting sideways in a narrow trading range. This is (hopefully) just a passing phase as  I have found that when the going gets tough I need to just wait it out and trust in the charts.

I run a theoretical trading portfolio of 10 stocks which is balanced in that it covers a range of sectors. I did this for people who have bought my educational material and update it each week - so as to give experience in how to professionally manage an investment portfolio and show that you don't have to have very much charting knowledge to do so. The portfolio is based on a weekly chart and stocks are only assessed on the basis of whether to hold or fold each Friday.

While I'm only just better than break even in my own trading since Jan 1, since starting the theoretical portfolio 4 months ago it is up over 9%. Doesn't sound a lot, but it is an annualised return of close to 30%. I'd expect about 12% - 15% per annum so I won't be surprised if a few of those trades fall off their perch. However, it does show the value of a 'steady as you go' approach combined with a conservative portfolio. 

The XAO seems to be rising from the lower boundary of the price channel in the chart below and it would be good if it could go on to make a higher peak on the weekly chart. That could see price go back to the top boundary of the channel (around 7,350) and coincide with a very strong level of resistance from a larger price channel (not shown but range of upper boundary of that channel is shaded in red). I suspect that if this short rally comes to fruition then it could be followed by a correction of around 14% - although sometimes corrections get a life of their own and turn into bear markets.

By the way, the red sloping line follows the daily highs which have shown a strong bearish, consistent decline. The XAO needs to break this pattern as a first sign of the short rally I’ve pencilled in.

Gold moved up 0.45% for the week, although its chart remains very bearish and in a very strong downtrend.

While the XAO eked out a rise of 1% this week my own trading made 2.7% wiping out most of the losses of the past few weeks when my trades fell short of the market.

The only trades to fall were TRS and HM1 – both of which seem well placed to recover. SYD, CUV, WEB, SLR, SFR, OZL, ORA and FLT all rose by more than 6%. Some of these were new purchases while others were top ups this week so not all of the 6% flowed to me. I also topped up MQG and CSL. I sold 50% of my CSL holding a while ago due to their falling fortunes but bought back because they seem to be rising off a support level and a significant low and were up 2% for the week.

Stocks to Watch this week see an inclusion of HAS (bit speculative but an interesting chart) and (not surprisingly) travel stocks SYD, WEB and FLT. SLR also look as if it can make a run as does SGM if it can maintain its recent momentum. BLD has been removed after rising 7% this week and while it has further to rise, it is now too close to my target to represent risk reward value. Many stocks are showing promising moves but the market remains bearish and now is not a time for too many speculative punts.

XAO 12Mar21

Weekly Blog 5 March 2021

Another week I prefer to forget about. On days the market rose a little my trades slipped and on the days it fell they slipped further! No dramatic changes but enough to be disappointing. Your fortunes were probably dependent on what market sectors you favoured – while Financials rose by nearly 5%, Gold fell by 6% with Health not far behind at 4.5%.

The XAO after going nowhere for the week (down 0.03%) is still clinging to the lower boundary of a long-standing price channel. While the week’s low fell out of the channel it rose to close right on the boundary, meaning the body of the candle this week stayed in the channel. The fact it closed near its mid-point is positive and offers hope of some recovery next week. I still feel another rally is on the cards before the market sees another correction.

XAO 5Mar21 

I sold out (or down) some small holding in non-performing trade as their price fell – PLS, MVP, PAR, CIM, MSB, FPH, DOW and WPL. PLS looks like it may be trying to move up having made a reversal candle this week and DOW moved up later in the day I sold. FPH, DOW, PAR and CIM will remain on my watchlist for potential rebuys if/when the market recovers.

I bought COH and SGM this week and both subsequently fell a little.

My best performers for the week were SGM (5.4%) and OSH (+4.2%) – although SGM was purchased during the week after much of that rise. TRS (down 6%) was the only stand out loss. I’ve persevered with TRS because its chart suggests this week was (should be) its low and as it made a strong reversal candle, a long-legged doji (you’ve got to love the names!) I’ll be interested to see where price goes next week.

Given the volatility of the market and many shares having fallen back this week I can’t see any new stocks to add to my Stocks to Watch page. I can see many I think look like they are working on a price recovery, but their price patterns are less than certain. Of last weeks list I’ve deleted ABC and NCM which have both moved significantly lower. Some others that moved lower for the week, like WGN and TRS moved up on Friday to make reversal candles. Others that moved lower still show potential to change trend.

Gold which is traditionally a safe haven in difficult times shows no signs of stopping its 8th month of falls, losing nearly 25% of its value.

Weekly Blog 26 February 2021

Another initially OK week brought to its knees by a big fall on Friday. Price has dropped out of a price channel I saw several weeks ago in the chart of the XAO, but I now think that price channel’s lower boundary was incorrect – see my XAO analysis for the detail and where I see price heading from here.

My trades lost 2% this week thanks to Friday’s rout. The number of trades that lost ground was only a little more than those that gained but I did see some significant moves – TRS (-12%), FPH (-10.8%) and RWC (-8.9%). On the other side of the ledger ABC rose 11% and WGN 7.4%.

I sold some of my MVP trade as it hadn’t turned around as hoped (although of course it seems to be doing so since I sold –which is always the way!). I also sold the last of my MYX as it has continued to disappoint. ECX was closed out for a small profit after peaking exactly on target. Unfortunately, its price fell back strongly and I missed exiting at the top.

I topped up OSH and WGN and bought FLT, WEB, HLS, PLS and ORA but, alas, all ended the week in the red.

The hypothetical long-term trade portfolio I’m running for those who have bought my educational material rose 2% for the week – so at least that was one bright spot in an otherwise less than positive environment.

A number of my Stocks to Watch fell off their perch in line with the general market. Given concerns about the market’s future direction 6 of last weeks picks have been removed as being now less likely to perform. I have added 5 new stocks which have been building potential patterns that have held up better in face of Friday’s negative market sentiment.

As my XAO analysis says, I’m expecting higher prices next week and reading Saturdays Age there seems to be a lot of positive sentiment about potential for travel to resume and the economy in general looking up. Hopefully, that positive sentiment will bring the buyers out of their bunker next week.

Contact

Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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