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The XAO closed up 1.4% for the week, making it two positive weeks in a row – as compared with the US having 4 sequential weeks lower. Price is still trading within the range of a rising flag pattern and last weeks candlestick pattern suggests a rise next week. On the daily chart Friday closed 0.3 points higher than the previous peak on 16 September. Technically, a higher peak but given the margin I wouldn’t necessarily read the promise of higher prices into this. As I write futures are in the green and the US had a positive Friday their time.

The push up was in part driven by the finance sector on news the government plans to ‘abandon’ responsible lending guidelines. I suspect this is a media sensationalism (or a poor choice of terminology by the government - again). From what I’ve seen it only means that lenders will be able to rely on borrower’s claims as to their disposable income. Assuming the eventual legislation reflects that I expect business much as usual by the Banks and the windfall some investors might be expecting will evaporate and share value will be challenged – especially when bad debt write offs from the virus driven recession start to show up and eat into provisions.

On the negative side, this week has seen a lower trough on the weekly chart – usually considered a sell signal.

XAO 26Sept2020

I’m still moderately comfortable that price will move up and possibly break up out of the flag pattern (It would need some confidence to come into the market to see this). The alternative is price might rise but fall back before making a higher peak and then fall down out of the flag with a lower trough. This would be a major negative and suggest new lows of 5830 or 5400 are likely. It remains a time to watch your investments closely and have good tight stop losses – just in case.

This week I sold SXY for a gain of 9% and SPK for a small loss (2%). I bought SPK in 3 tranches in line with my trading plan (Got one? You’re gambling if you don’t). Made a profit on the first tranche, broke even on the second and lost on the third. This trade started in April and didn’t move up as expected (hence a long hold for me) and has been in a very slow decline since the start of August. I suspect it will probably recover and head up towards $5.00 from its Friday close of $4.33 (especially given I’ve sold – it’s Murphys Law). However, at the time I sold there was a good probability of lower prices and my stop loss was broken in an uncertain market. I have a couple of other trades underwater but hanging on above stop losses that I’m watching closely.

I also topped up my holdings in TCL and CSR this week as both are performing well. A share I traded a couple of weeks ago and sold at target (TSO) fell back 17% from its subsequent high, rose 16% and Friday closed up 10% from where I sold. The extreme volatility has kept me out of the stock.

Stocks with a bullet on my watch list this week are PTB, PPH, COH, WOR – but as noted above this is an environment to be cautious of and a time to ideally stick to larger cap shares. See Stocks to Watch on my Stock Commentary page for a summary.

For the week 10 of my holdings rose and 6 fell and while I don’t track a weighted average it was about a break even result dragged down by two small holdings in PLS (down 17%) and AVH (12%). AVH is recovering and broken above a downtrend. PLS will break my stop loss unless it closes higher this week. The sharp loss might be due to concerns over Lithium prices with Tesla entering the industry to push battery costs down. Best performers for me were TCL (up 8.4%), PME (5.5%), CSR, CCL (4% - 5%).

Contact

Robert Norman

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

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