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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.

Contact

Robert Norman

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

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