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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.

Contact

Robert Norman

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

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