Follow us on our Journey

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.

Contact

Robert Norman

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

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