Weekly Blog - 15 October 2021

While the past 2 weeks have seen a 2.4% improvement in the XAO, price is just below significant overhead resistance which could see price fall – potentially around 2.2% to 7200 (or lower if it breaks 7150). Interestingly, this weeks high was right on the upper boundary of the large shaded price channel on my chart. The price is also right on a possible new downtrend that may be forming (the red dashed line). Price has held below this possible downtrend for 9 weeks. Put another way – price is currently at the confluence of two overhead resistance levels and I have to think price will again fall next week. The short solid black line marks the trajectory of where price could go if it manages to break higher. A break above these resistance levels would be a strong signal that prices could rally back towards 8,200 (but possibly wishful thinking on my part given the strong headwinds).

XAO 15Oct2021

My own trading has seen gains in line with the XAO. NMT (up 14.6%) was my best performer with ABR coming in second at 11.1%. LYC also put on 6.8%. During the week I bought into and then subsequently topped up one of my old favourites, SGM, which ended the week up 9.9% - not that I saw all of that. The rest of my trades fell back, but not by large amounts. I sold SXY for a profit during the week – seemingly at the right time as it has pulled back a bit since then.

Last weeks Stocks to Watch mainly fell a little with SLR being the stand out performer, being up 10.3%. This week I have removed TLS as it seems to be rolling over and may fall further before rising. I’ve added OZL and NCM.

Fingers crossed for another good outcome next week.

Weekly Blog - 8 October 2021

The roller coaster ride continued this week with the market alternatively rising and falling back to lose those gains, but ultimately closing higher for the week – the first positive week for 5 weeks.

Where to from here is anyone’s guess. This weeks candle closed on its high (up 1.75%) suggesting further rises next week. However, the US closed flat on Friday and without any guidance from Big Brother our market is likely to be directionless on Monday in the absence of any other catalyst. The line in the sand for the XAO is 7466 and should price fall and close below that, we are probably going to see further falls to the next support level. On the other hand, if the XAO can get above 7720 it will make a higher high and might just be encouraged to go a bit further. 7900 is the previous high and I’d be surprised to see price break above that. A continued sideways shuffle until the first week in November is another likely option and were that to happen, the chances of a short rally around the start of the month is plausible. However, until we get a reasonable correction behind us, the chances of a sustained rally are constrained.

Gold is seeing a resurgence but it remains to see if that can be maintained.

Gold sector 8Oct21

This chart of the gold sector index shows that last week price broke above a downtrend that has been in force for some 6 months. A higher close this week would reinforce the view gold prices are in recovery mode. The sector made a head and shoulder pattern early this year which predicted prices falling to 5947 and the lowest close 2 weeks ago was only 1.5% off that prediction. Should the index get a wriggle on and break above 7660 then that would suggest further rises ahead – but how far would depend on the price action leading up that level. Anyway, it is something for the gold desperates to hope for!

I’ve closed out a couple of small trades that broke stop losses earlier this week and haven’t seen many stocks that I’d be prepared to risk a punt on in this challenging market. That said I have added SLR (a gold stock) to my Stocks to Watch. Last weeks watchlist did quite well with SXY and JLG up over 6%. I’ve removed SXY this week as it is unlikely to rise much further in this rally. I’ve also dropped FPH after it fell 5.7% with week. It has retested a previous strong level of price support so it may recover but if I wasn’t already in FPH I wouldn’t be buying at the moment.

Good luck for another week.

Weekly Blog - 1 October 2021

The XAO closed 2.1% lower for the week after falling to my previously suggested support near 7480. It then recovered most of those losses to climb back to 7630 on Thursday -  only to give away all those gains to close back at support at 7457. I see 7480 probably holding and prices rallying for a few days next week, perhaps even breaking up out of the regime of lower peaks and troughs we have been seeing on the weekly chart. However, that could just be wishful thinking on my part as Friday’s candle was a strong bearish candle, although it didn’t close on its low. In short, there are charting arguments for both rises and falls from Friday’s close.

I was struck by the strength of BPT’s chart last week and bought in to get a slice of its 19% gain for the week. It has fallen back a little on Friday, but I’m continuing to hold for now.

BPT was one of several stocks I identified last week as potential trades based on a break above downtrend. Despite the general market pullback, most of those stocks finished in positive territory for the week (see the table below) -.

DT break Sept24

My trades in LYC, NMT and MP1 were all down between 6% and 9% for the week and my overall result was in line with the XAO. LYC and NMT have both fallen back to trend from where they should move up again, (unless the XAO fails to hold at 7480). MP1 has broken below trend while making a sideways pattern in a tight range for 10 weeks. This type of sideways consolidation pattern usually (but not always) breaks higher and for now I’ll see how this plays out – despite the break below trend. A break below that pattern would see the trade needing to be closed out.

My theoretical medium term trading portfolio has seen 4 of its 10 stocks break trend and sold, but it is still up 16.5% for 10 months and despite those sales (which are made based on a strict trading plan) the portfolio only fell 1% last week.

My Stocks to Watch are really just a theoretical exercise in this market, but XRO and WES have been removed as their price moved back. I’ve added SXY which has broken above resistance.

Good luck for the coming week.

Weekly Blog - 24 September 2021

Another week that saw big losses on Monday gradually clawed back over the next 3 days, but ending lower after a small pull back on Friday – albeit on lowest volume for the week, given Melbourne’s public holiday for a football match it can’t hold due to Covid.

Last week I said I saw support at 7,483 for the XAO and (remarkably) as the chart shows, price bounced off that level. The next test is whether it can break above the line of overhead resistance at approx. 7,750 for a short rally towards 8,000 and possibly beyond. A break higher could give a target of 8,300 – although I think selling pressures would probably see any immediate rally fall short of that number. Any rally above 7,900 should be considered as being on borrowed time.

The XAO fell 0.7% for the week whereas my own portfolio and my educational balanced long-term portfolio both fell back around 2%. Whether you were in front or behind this week (as always) depended on what sectors you were invested in with materials falling 2.7% and gold down 4.0%, while energy was up 4.9%.

Gold remains a disappointment with the sector seemingly unable to find a bottom after making another new low this week. That lower low in charting terms suggests even more falls ahead, although the current price is also now at a level other charting theories suggest should be a floor.

My Stocks to Watch this week sees VCX deleted as its price has fallen back and the pattern less likely to play out. AIA, WES and REA have been added. AIA rose 3.5% for the week to break out of a sideways pattern that has held it rangebound since the start of this year. It has a potential target of $8.30 but with Covid issues still front and centre, any material push up could see headwinds. WES is coming off a low and is more of a long-term play, whereas REA rose 7.7% this week to close just below resistance at $172. A confident break and close above that level could suggest a target near $198.

Overall, the charts of many stocks are pointing in the wrong direction and don’t provide an encouraging outlook. Today I scanned the entire ASX 300 to see what stocks met the buy criteria I suggest anyone without a lot of trading experience and/or charting knowledge. This is a simple buy when a stock is nearer its lows than its highs and has broken above a technical 12 week downtrend line for 2 consecutive weeks. I only found 13 – and that lack of traditional buy signals should give all traders pause for thought. Many stocks have made trend breaks some time ago and are still climbing, but having risen markedly they are more likely to fall than rise significantly further. Others have broken downtrends recently only to fall back (a fall after a break that sees price go below the last trough before that break above trend is a sell signal). Many others are threatening to break above downtrends, suggesting good buying opportunities may arise once the corrections I see ahead (or happening) has blown over. I don’t intend to analyse in detail those 12 potential trades, but here’s a quick overview:-

BPT seems to meet those requirements after rising 11% last week. I say ‘seems’ because it isn’t possible to draw a technical downtrend along 3 peaks but a line of best fit suggests BPT may have broken above trend for 1 week and should that become 2 close above trend next week, it would be a buy.

CNU has been falling for a few weeks and could be a buy if it moves up (making a break above the short-term downtrend on the daily chart would be a start).

INF A low value stock that seems to tick all the boxes. Making higher troughs and peaks but would feel more comfortable were it to break above $0.16. While I like the chart, I prefer to trade companies with proven profitability/expertise – so will pass.

NXL has rumours of potential misleading listing documents and given that history it is not for me.

OPT has moved sideways for 6 weeks but while meets my buy criteria, it is not yet a profitable operation. Again, like INF, it is not a profitable operation so I will pass.

ORG has had its price savaged over the past year or so and it has made 2 valid downtrend breaks in the past 12 months where buys would have led to losing trades. There is nothing to say the recent break won’t lead to another and I’d want to see an uptrend form and/or prices move above $4.90 to buy in. From a charting perspective it is interesting to see these prior breaks on the chart. As they unfolded, each would have been valid buy signals, but when price subsequently rolled over, a new downtrend unfolded to repeat its trick of sucking in the punters. I do think ORG has promise, however – the problem is when!

ORG 24Sept21

QAN has been a historically a difficult stock to trade and price hasn’t really gone anywhere over the past 12 months. Price is at a very strong past level of resistance.

RBL’s price has fallen heavily over the past 6 months but the recent break meets our criteria. It has made a higher trough and is price moves above $4.50, that higher peak would suggest a buy was possible.

RED is a small gold explorer with a market cap of $480M yet to show a profit. I like the chart but prefer to trade companies with proven profitability/expertise.

SPL has fallen more than 50% this year but it is at a level I consider to be a bottom and has made a strong break higher. If the move up is a change of trend then it is probably on an Elliott Wave 5 which suggests a peak above $2.50 in the longer term. The daily chart shows higher troughs and peaks and I’d give SPL the stamp of approval. However, it is a biotech and like gold explorers they often don’t show profits – so based on my comments about RED I’d probably pass on SPL in this market.

TPG is a $12B company that has been rising slowly (but with volatile moves along the way). My principal concern is that I can’t find a valid Elliott Wave count – meaning that I’m unsure where it is on its current price cycle. While it hasn’t confirmed a valid uptrend line (only 2 troughs and we need 3 in a line) it has confirmed a 12 week uptrend and is making higher troughs and peaks. A buy for me.

So, out of an initial 300 stocks I found 13 possible trades, which in the end distilled down to just 1 buying possibilities – TPG.

Weekly Blog - 17 September 2021

Another week of promise where the dark storms of Friday clawed back all of the prior 4 days gains.

My hypothetical long-term educational portfolio closed up 1.1% and my own trading was 2% in the green (making up for a poor showing in the previous week) – both good results when the XAO only broke even (down 0.4%).

Gold continues to be an ongoing disappointment for me as I felt it was moving up from a bottom, but Friday proved me wrong on that count. I had NCM in my educational portfolio as well as my personal trades (although the latter was just part of an earlier larger trade that had already been sold down). Both these holdings will be sold on stop loss come Monday unless NCM opens with a rocket under it.

The XAO remains bearish now having made a lower trough followed by a lower peak and another lower trough. While last week’s candle was a doji, suggesting a reversal and higher prices this coming week, Friday’s US market was lower and our futures are down almost 1%. It’s hard to see much joy in the charts this weekend.

I did have 3 small flutters this week on NVX, ABR and NMT because they all had strong potential for short-term gain. NVX obliged with a 14% windfall for a 24 hour trade, while the others moved back a little on Friday.

BXB was the big loser this week (down 9%) and I did something I tell people not to do. I’d sold two thirds of my trade a couple of weeks ago (which was opportune) but I bought more at the low on Tuesday as I couldn’t see any real reason for the big fall and felt that BXB would probably recover (it has picked up 3.5%). However, doubling down is a really, really bad way to trade.

On the positive side of my ledger JLG rose 7.7%, TRS, IFM and LYC all added between 5% and 6% for the week.

With Stocks to Watch I’ve deleted BXB (for obvious reasons) along with SFR, NAB and MIN, who have all lost their immediate promise. I’ve added TLS (an old chestnut) and TRS who now seems to be on the road to recovery.

Weekly Blog - 10 September 2021

My comments on the XAO pretty much says it all this week.

In short it is a time to consider whether it is time to exit positions that are underwater or not performing as planned.  This is not (yet) a case of "The Sky is Falling" and the best advice is not to panic, stick to your trading plan, watch your stop losses and err on the side of conservatism. It is worthwhile still keeping an eye out for the occasional speculative short-term trade opportunity because, as my blog says, even in a falling market there will be opportunities with stocks that (unlike the market) are moving up and closer to their lows than their highs. Those stocks are better predisposed to achieve gains from pattern and resistance breaks – but always remember if the larger market is trending down, individual stocks that are rising are effectively swimming against the current and may fall short of target expectations.

The best outcome would be for the market to quickly correct to somewhere around 7000 points to open up new trading opportunities as prices again move up. The most likely scenario for a time is a period of sharp short-term rises followed by equally savage falls. It is possible that the improving Covid vaccination rates and a release from lockdown on the horizon for Sydney and Melbourne may see some misplaced enthusiasm from the ASX. While I'm suggesting lower prices are more likely there is nothing that says they can't go the other way - which is exactly what happened back in 2006 before the GFC. Perhaps we'll see that same pullback as May 2006 as the chart then showed exactly the same large and small price channels as it is today. Prices corrected by 12% only to push up 36% and out of the price channel until another 15% correction 12 month later, followed by those losses being recovered (plus some) before the GFC arrived, bringing a bear market and a 55% collapse in the XAO. Sound like fun? It wasn't. And yes, history does repeat - especially so in the case of the stock market. XAO longterm

 XAO May2006

No new stocks have been added to my Stocks to Watch as the negative market sentiment has impacted most emerging opportunities for now. As could be expected most of the listed stocks from last week fell back, however, most retained their potential to recover if the market does change sentiment and move up. I have removed MQG because it achieved my target and has since fallen back; BFG as it broke down out of the pennant pattern I had been watching; and IFM suffered a significant reversal in price.

Weekly Blog - 3 September 2021

The XAO pushed up 0.86% for the week and remains well placed to achieve 8,000 points (my current target is 7,969).

There were some big gains across the board with 17 shares in the ASX 300 rising by 10% or better – MYX being the leader, up 25%. A reversal of iron ore prices contributed to BHP’s 5.3% decline.

My educational medium-term trading portfolio rose 1.7% and my personal trades were up by 2.0% - in part helped by a 2 day trade in NVX which netted a 17% profit.

There are an increasing number of short-term opportunities showing up for the chartists watching pattern and resistance level breaks. I remain concerned about the market’s ability to continue to rack up new all-time highs and while prepared to punt the odd share like NVX I’m opting to generally keep to a more conservative approach of holding mainly strong value stocks like MQG, COH, FPH, CSL, BXB – to name a few. I sold BXB on Friday to take some profit and reduce my exposure to that stock. I normally don’t sell until a stop loss breaks, but BXB’s movements of late have been more exaggerated than normal and I just felt it was time for a change. I bought into JLG this week because it is a stock that trends beautifully and it recently had a bit of a pullback to trend. It rose 7% for the week.

Investors streamed back into travel stocks this week, prematurely in my view given there is little likelihood of extensive international travel on the horizon for some time and even domestic travel may take some time to be realised in the hermit kingdom’s of WA and Queensland. I suspect burgeoning Covid cases in Vic and NSW will ultimately find their way over the border and their Covid-free aspirations proved to be a myth.

All but 2 of my Stocks to Watch rose and I see no reason to remove any from my lists. I’ve added JLG, VCX, SFR and MIN (the latter showing a potential 30%+ gain) – although there are numerous other contenders in this rising market

Hopefully, the market can push on back up to new highs this week – good luck to all.

Weekly Blog - 27 August 2021

Thank God reporting season is over as it has been a feast or famine depending on the mood of investors. Some companies reporting arguably good results, but not providing future guidance, were shot down in flames while others like Z1P, where investors were hoping for a maiden profit only to see an eye watering $650M loss (a 3,000% decline!) saw their prices go up (or in the case of Z1P, little changed).

The US market (and hence the ASX) has been nervously awaiting a US Federal Reserve announcement regarding changes to their quantitative easing program this weekend. It seems the announcement was largely ‘steady as you go’ so I expect prices will recover next week. While I still wouldn’t be necessarily surprised to see the XAO fall back to 7650,  yesterday’s (and last week’s) candles indicate a rise is more likely. The weekly candle closed higher than it opened, and Friday’s candle closed in the upper half of its range. The candles are both hammers (the weekly is an inverted hammer). Both of these candle shapes signify a probable reversal (although ideally I would have liked to see a longer wick on both).

My own trading was a mixed bag with strong stocks like ABC, COH, BXB and FPH all pulling back – although IFM was the pride of the litter, up over 12% (something I suggested might be possible 2 weeks ago).

My diversified medium-term educational portfolio was down 0.8% for the week against the XAO’s 0.45% improvement (but still up 20% over 9 months).

In late July I posted on a trading forum about the merits of trendline trading and quoted a list of shares that had broken trend recently. Now, a month or more on, the table in the chart below shows their performance for the current month (over which the XAO rose 1.25%). Their results were quite strong when you look at the reversal several of them incurred during the pullback over the past two weeks - even KGN improved over the month despite its big fall last week.

DT breaks July

My Stocks to Watch from last week were (like the market) showed mixed results with WTC rising 29%, IFM 12% and ECX 8.7% -  while ABC fell 11% and KGN 16%.  This week sees the removal of ABC and KGN (for obvious reasons, although I expect ABC should recover more quickly than KGN). I’ve also removed ECX and WTC because they have moved up close to potential targets and hence may have largely run their race.

I’ve added NAB to my list this week as it seems to be working on a break above resistance at $27.80 – something that would suggest a short-term target of $30.45. A number of the banks look to have good prospects at the moment and while you will never make a fortune trading bank’s short term, now could be a good time to think about adding NAB to a long-term portfolio.

Contact

Robert Norman

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

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