Weekly Blog - 23 July 2021

After big losses across the board on Monday and Tuesday the market achieved three positive days in a row to finish up 0.5% for the week.

Market sectors were mixed with health care up 4.7% for the week while gold was down 4.7%. Consumer Discretionary, Financials and IT were all up about 1.5% on average while Energy, Resources and Materials fell by a similar amount.

Looking at the ASX 300 NCX, PNV and ILU all rose buy just on 10% while the biggest losers were PLL (-18.6%), DTL (-11.9%), SLR (-11.0%) and SSM (-10.0%)

My own trading saw the best result for some time with good moves up by everything except gold – which held my overall performance to 0.9% for the week. ILU (+10.0%), CUV (+7.1%) and CSL up (5.7%) were the stars while ENV (-9.4%), STO (-6.1%) and NST (-6.0%) dragged my portfolio back.

My Stocks to Watch last week generally performed well, moving up 1.5% on average. EOS rose 9.3% and LYC 4.2%. AIA fell 5.6% - perhaps on response to the worsening Covid outbreak popping the NZ/Australia travel bubble. However, the fall was only back to trend and providing price can hold above $6.70 the chance of a reversal of fortunes appears reasonable. I’ve added SLR, WTC and XRO this week. See my Stocks to Watch page for individual analysis.

Where to next week? The XAO has made a new all-time high which could spur further rises next week. The XJO broke marginally above a pattern where a break up also would suggest further rises. However, my enthusiasm is tempered somewhat by both indices showing lower than usual volume. While the jury is still out on next week’s direction my feeling is further moves up are likely, driven by strong profit reports from the US.

Weekly Blog - 16 July 2021

The XAO rose 1.1% for the week but this was probably a result of recovering some losses from last Friday’s sharp fall. The bigger picture shows the market has gone nowhere in the past 6 weeks, with open and closing prices falling in a narrow range of 7540 to 7630. 7650 is proving to be an impenetrable level of resistance with price having turned back from this level on 3 occasions in the past 6 weeks..

As always price can go either way, but my expectation remains for a break above 7650 with higher prices to follow – but need to bear in mind the market is at an all-time high and primed to correct.

My own trading mirrored the larger market (up 1.1%). Volatility of my holdings has reduced and there were no major rises or falls other than FMG (which I bought this week to be up 8.0%) and NST (up 6.2%). I’ve been holding NST, NCM and EVN for the past few weeks as my analysis suggested gold was likely to rise. While those trades have generally moved lower since entry, they recovered some lost ground this week. EVN was the disappointment, only rising 2.7% for the week after falling heavily yesterday on a trading release. The release didn’t strike me as negative, but clearly it wasn’t positive enough for some. I’d expect EVN to recover those losses next week. Looking at GLD (Gold spot price index) it is rising off a significant low at the end of March 2020, has broken above a weekly downtrend, and had been making higher troughs and peaks (up until June) on the weekly chart – all of which are buy signals as they suggest higher prices. This run was broken by a sharp decline throughout June when price fell back to retest an underlying long-term support that has been in place since 2018. Price has closed higher each week since the start of July making it technically a counter-trend buy.

The XGD (ASX gold index) not unsurprisingly mirrors the performance of physical gold.

Trawling through the XAO looking for potential patterns, the overall impression is that many traditionally strong stocks are trending down and don’t present as strong buys just now. However, AIA, FMG, LYC and BOQ do show potential breakout patterns. FMG’s prospects will largely be determined by the iron ore price – which is currently at an all-time high and as such (like the stock market in general) is at risk of correcting. LYC is the only stock of those picks that has actually made a breakout of a pattern confirming it as a technical buy in my opinion.

With my Stocks to Watch I’ve removed VUL as it achieved its projected 30% gain before falling back from that target. PTM also got the chop as it made a lower low on the weekly chart. AIA and FMG were added.

Weekly Blog - 9 July 2021

The XAO has been making a sideways pattern since the middle of June and it is the type of pattern that should see price break up out of said pattern (bearing mind these patterns can also equally predict falls), then I would expect a modest rally to around 7,830. Thursday I was confident that move up would eventuate. However, NSW’s Covid outbreak seems to be the reason the market fell on Friday leaving me (and most other traders/investors, I assume) in the red for the week.

Price did close off its lows for the week and the US had a positive session Friday night – so hopefully a recovery might be on the cards for Monday. But, until NSW’s Covid situation stops growing I see the market being depressed.

My own trading was down by 2% for the week, mainly with CUV falling by 10% and SGM and PTM both retracing 5%. No stocks broke stop losses requiring them to be closed out.

I bought into LYC during the week after it broke up out of a pattern suggesting further rises ahead. LYC was my only stock to end the week in the green. While I’m not a BNPL fan, Z1P also made a pattern suggesting it would go higher. however, it took a hit from Friday’s fall and that outlook is a little less rosy as a result.

Needless to say, most of my Stocks to Watch didn’t perform in this week’s depressed market.  VUL was the exception, rising 4.3%. I’ve not removed any of last week’s listing because while the short term outlook is now less certain for a number of these, the potential to perform remains. LYC has been included for the reasons outlined above along with BOQ which, despite falling this week, could see gains of up to 20% in the short term – if it can break above overhead resistance.

Weekly Blog - 2 July 2021

The XAO continues to trade sideways in a narrow band and the potential jump higher didn’t happen this week. If price does manage to make a new all-time high in the next couple of weeks I see there remains the potential for a move up to 7,845 but in this fickle market making predictions about price movement is problematic and a fall is just as likely as a rally.

The gold and IT sectors were the big losers this week with gold down 1.8% and IT 3.1% - so, as for previous weeks, whether you made or lost money last week will depend on your exposure by sector.

My student trading portfolio finally had to close out 2 trades this week – the first in 6 months. A search for some replacement trades showed there to be very, very few safe bets out there (if anything is safe in this market). In fact I only found 3 stocks I could recommend because they ‘ticked all the boxes’. This tells me that perhaps the best course of action is probably to sit on the cash, but an educational portfolio without any trades wouldn’t be very educational. I keep a balanced portfolio of 10 stocks, by the way.

After closing out the two trades the portfolio is up 14.5% for 7.5 months – an annualised return of 23.3%

My own trading saw no major moves (CUV was the biggest mover, up 5.8%) but 1/3 rose and 2/3 fell leaving me down about 1% for the week. I remain a bit overweight in gold, which again dragged me down this week. However, I still feel confident that the charts are saying gold will move up from the current price. I finally put a bullet in my SPL trade’s head this week as its price continued to drift lower.

With my Stocks to Watch KGN reached its target and has been removed (it fell heavily after achieving target). The other stocks from last week have been retained, despite most falling by 2% or so last week. As noted above, there doesn’t seem to be many exciting picks jumping out from the charts this week, but I’ve added BXB as it has broken above a downtrend, made a new uptrend and is coming off a significant low. The chart suggests a potential 16% rise in price in the short/medium term.

Weekly Blog - 25 June 2021

After a big fall by the market on Monday, Tuesday saw most of those losses recovered. The market then drifted lower until staging a dramatic recovery on Friday. These gyrations were largely driven by global concerns over interest rate outlooks and potential inflationary pressures. The XAO closed 0.6% lower for the week and the XJO was down 0.83% -meaning large caps didn’t do as well as the more speculative stocks.

Gold has now moved up for 5 weeks and looks like it could be starting a new rally. Promisingly, the gold spot price rose 0.35% in Friday’s US trade. Perhaps we’ll see gold stocks follow this lead next week.

My own trades were down 0.2% which was at least better than the market. My best performers were ABC  and ECX (up 6.8% and 6.1% respectively) while the worst were CSL and SPL (down 6.7% and 7.4%). SPL has been on my death row for some time, but it is only a very small holding and was making signs of recovery before an adverse press release this week regarding incomplete disclosure regarding their products in the UK.

I bought into KGN and PTM this week because of their strong chart patterns suggesting further rises ahead (KGN was up 11% for the week).

My Stocks to Watch from last week rose 1.7% overall with ECX and PLS being the best performers with no major falls.  I’ve removed STO (after its price made a new low) and PLS after it achieved my predicted target. I’ve added KGM and PTM. The latter is quite a volatile stock, however, its price pattern suggests a potential short term target of  $5.50. While this target is only 10% above current price (making the risk reward ratio tight) it is coming off significant lows and hence has a strong probability of higher prices ahead. I’m avoiding buying into stocks that are near or at their highs for this reason. For example, KGN is also coming off a significant low.

While this week showed some potential upside in the market, we shouldn’t lose sight of the fact it is at all-time highs and while I suspect it will move up a little next week (perhaps to my current target top of 7680) another retracement could them be expected. Whether that will be the 3%-5% the market has experienced on 3 occasions over the past year or the start of a larger 10% - 12% correction, only time will tell. The worldwide resurgence of new Covid variants and the virus’ economic impact and travel restrictions could be another catalyst to weigh on market prices over the next few weeks. Should the NSW outbreak not be brought under control quickly (given the NSW government has done too little too late) I’d expect our market to take an immediate tumble.

Weekly Blog - 18 June 2021

The XAO rose 0.3% to hit a high of 7656 this week before closing at 7624, coincidentally right on the top boundary of a what I believe to a price channel that has held above price all-time highs since 2009. The week’s high was also 20 points shy of the possible top my charting analysis suggests. In short – the party is probably over and a correction is now gathering on the horizon. I was search for an analogy to describe the current market outlook to post on a stock forum I frequent and ended up writing the short story at the foot of this post.

XAO 18Jun21

Interestingly, the XJO (which tracks the ASX 200 as against the XAO’s top 500) suggests it probably has another 200 points to run. That could be down to the beefier stocks in the XJO being both slower moving and more resilient.

Channel boundaries are not impenetrable. Like everything in charting, they are simply an indicator, but then a ‘Don’t Walk’ sign is an indicator as well – not one to be ignored.

With the Dow down 3.5% last week and 1.5% Friday night it is a given our own trading will open lower next week (our futures are down 1.5% as I write).

I have moved to a more conservative portfolio profile over the last 2 weeks and will now start using prior troughs on the daily chart as stop losses unless faced with strong charting analysis that says otherwise.

I have mentioned previously that charting of individual stocks gets a bit unreliable when the market is near its top and investor fear starts to replace greed. All bar 2 of my 15 Stocks to Watch fell last week and 7 have been deleted on the basis their price moves suggest they are less likely to achieve their targets. Most stock patterns are bearish of late and the only stocks I’d suggest as having promise (and were added) to my Stocks to Watch this week were COH and TCL. Both companies are coming off lows and well short of their all-time highs, suggesting they could have clear air ahead for a while.

Travel stocks (WEB, FLT etc) showed some life this week but with Covid still bubbling away their outlook remains troubled. More so AstraZeneca had not been approved by the FDA and perhaps when things do open up will those Australians who received AstraZeneca will face restrictions if Broadway’s restrictions on their first post-Covid concert by Bruce Springsteen is any indication. https://www.theguardian.com/music/2021/jun/18/bruce-springsteen-vaccine-astrazeneca-broadway

My own trading for the week was down around 1% due to big falls by gold stocks (supposedly in response to a rising US dollar). The charts suggest gold is at a level of support and may rally (hopefully, as I am a little heavy in gold).

 

 

THE LAST FLIGHT

With nothing to do while the charter flight (VH-ASX) was  on auto-pilot, the pilot and co-pilot, both dead tired after several long shifts, had dozed off only to be startled awake by the persistent buzzing of a warning indicator.  The alarm drowned out the music playing softly in the pilot’s earbuds. Ol’ Blue Eyes was crooning out prophetic lyrics – “And now the end is here, and so I face that final curtain.....

Outside it was now totally dark and they realised they had been asleep for some time. A quick check of their location and instruments showed they had overshot their destination by more than 100kms and the plane’s low fuel warning had kicked in. The pilot knew their fuel load was a little light before he took off, but he’d flown this route dozens of time and with bad weather coming he didn’t want to waste time refuelling. Nobody would know he bent the safety rules a little, it was something he’d got used to getting away with.

They needed to turn back - urgently. The pilot banked the plane around 180 degrees and contacted air-traffic control, only to find they had been trying to raise him since the plane deviated from its flight plan.

Now flying into the cold front that had previously been behind them, they were  buffeted by rain and wind. The co-pilot visibly paled as he calculated their fuel use only to realise it would be touch and go whether they would reach the safety of the airfield still some distance away.

To conserve fuel the pilot started to slowly descend in a long glide pattern towards their destination, aware his skill would now determine whether they had a soft landing or crashed. “At least there won’t be much fuel to burn” he thought sardonically.

Time passed slowly, too slowly. The pilot’s shirt was plastered to his back with sweat and his knuckles were white on the controls. A smile of hope crossed his face as the lights of the airport became visible in the gloom ahead.

The port engine coughed and spluttered ............

Weekly Blog - 11 June 2021

The XAO has continued its slow creep higher moving up 0.45% for the week. Over the past 5 weeks the highest weekly price of the XAO has only increased 0.4% as price creeps along the top of the green price channel in the chart below. Price patterns suggest a top of 7680 which might see the current sideways creep continue (until mid-July?) after which a correction of some degree could be expected. However, timing can be very ‘rubbery’ in charting and that ‘flame out’ by the market could be sooner or later.

XAO 12June21

Last week I commented that falling gold prices had adversely impacted my trades, however yesterday’s trading saw a material recovery of those prior losses.

I have previously mentioned a hypothetical long-term trade portfolio I put together as an educational tool to explain real time trading. Set up in November that portfolio has outperformed the market and my own personal trades with an annualised yield of more than 35%. This success is partly down to luck, but more so to selecting large profitable companies exhibiting a history of  long-term, consistent growth. With prices near or at all-time highs, pattern trading becomes less reliable while good stable large-cap shares just keep on keeping on.

I bit the bullet this week and sold 50% of my portfolio, clearing out all speculative trades as well as those that just didn’t seem to be moving up as strongly as hoped. Normally, my trading plan is to hold a stock until it makes a perceived target or breaks below a stop loss, and to go against my trading plans wasn’t an easy decision. My portfolio now comprises mainly stocks of a similar risk profile to my hypothetical trade. Having ‘cleared the decks. I topped up SGM and entered 2 new trade (BXB and ECX) – because their profile and outlook was more in keeping with my new trading plan..

As last week’s Stocks to Watch all still show potential to rise further, no changes have been made. TMT (rose 16.7%) , EMV (+9.1%)VUL (+8.1%) and PLS (+7.2%) were the standout performers

Weekly Blog 4 June 2021

As for last week, whether you made or lost money this week will have depended on your exposure to various market sectors with the energy sector rising 8.5% while the gold sector fell 3.5%. As I both held no energy stocks and was a bit heavy in gold, needless to say my own results for the week were negative – down 3.0%. That said, the outlook for those laggards remains positive and, as is usually the case in trading, the market likes to test traders resolve, and almost always I find that backing my analysis ultimately proves to have been the right course of action.

Also sticking the knife in were WGN (down 12.4% for the week) and TRS (down 6.0%). WGN can be a little volatile and this week showed signs of price manipulation with price pushed up only to be dumped and fall before doing it all again. WGN’s price remains above trend and my analysis suggests it should recover and still make my target. TRS issued a profit downgrade due to Covid issues impacting retail buying patterns. It was down 15% from last weeks close at one point but recovered a sizeable chunk of those losses to (importantly) close back within the pattern it has been making. a weekly chart. The downtrend that has developed over the last couple of months could have been the result of some investors foreseeing the poorer trade performance. I’ll hold for now.

Gold has broken above the downtrend that has been in force for the past 6 months. It has also confirmed a new uptrend and is making higher troughs and peaks on the weekly chart – all of which are buy signals. Recently price has risen at a higher momentum than the trend line implies and as such some consolidation could be expected with price falling back to trend (a fall of about 3% - 4%).  See my gold sector analysis here.

My Stocks to Watch were in the main not worth watching last week with TMT and SLR both falling 13% for the week and DEG down 8%. EOS was the only stock to trigger a buy and that moved up 14%. All the picks from last week (even those that fell heavily) have the potential to recover and have been left in the listing. SXY has been removed because it rose 8.6% this week and is now too close to its upper price channel boundary to be worth considering an entry - but see my energy sector analysis which also references SXY.

WPL, PLS, STO all presented charts worthy of inclusion in my Stocks to Watch this week. WTC was another contender, but some nagging concerns worry me re its otherwise promising outlook.

I thought it might be interesting to look at the energy and gold sector indexes to see what they told me and compare some of the players in those sectors with the index. Have a look at ENERGY and GOLD in Stocks to Watch.

Contact

Robert Norman

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

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