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A bit of a mixed bag this week and many investors’ fortunes did not reflect the 1.2% rise in the XAO. Reporting season pushed some stocks that reported strong results higher while in other cases positive results were punished for not being positive enough – the damned if you do and damned if you don’t outcome.

Both my own portfolio and my hypothetical long-term portfolio fell (down 0.7% and 0.1% respectively). I had some bright spots with SGM up 9.6% for the week and IFM up 6.71% (but bought during the week so only 2.5% in my pocket) while my gold holdings (NCM, NST, EVN) all fell about 5% on average and dragged my average down. Those gold shares are all hanging around their stop losses and I sold 50% of my NCM holding this week as a result. I also sold STO (down 0.5% for the week) and CUV (up 1.9%) because I felt uncomfortable with their price movements and their potential to fall further (although CUV could be a buy back if price continues to move up). TCL was also closed out because it simply hasn’t performed up as expected – and probably isn’t going to, given it dropped back 5.8% this week after a mediocre profit result. In short – this week saw a bit of spring cleaning to cull my non-performing trades.

As for the market ahead it would seem the strong reporting season results will push the ASX still higher. My long-term target of 7,833 for the XAO was achieved last week and my secondary target of 7,969 is also close at hand. There is nothing that says the market can't continue to climb past these targets but everything starts to look overbought and the potential for a correction continues to ramp up until something gives. Looking at the charts this weekend, many have made reversal candles and I wouldn't be suprised to see a small correction next week, but as noted, assuming the strong profit results continue it would need a significant trigger to materially turn the market. On that note, it is now a definite possibility that Covid will not be reined in in NSW (thank you Gladys and the LNP!) and possibly Victoria (although they are in a better position than NSW). Neither State or Federal governments can afford to lockdown both states until 70% vaccination is achieved and they will need to come up with a Plan B. That could be to release the lockdowns so businesses can continue to operate while strictly enforcing social distancing requirements and banning all form of gatherings and events - in short largely leaving it up to the population to vaccinate with Astrazeneca (and Pfizer where available) ASAP or suffer the consequences. Many small businesses would go to the wall in either this hypothetical scenario or an extended lockdown - and if a runaway Covid outlook is confirmed it would likely be the trigger for a market correction of perhaps 10% to 12%.

Stocks to Watch were a mixed bag with WTC moving up 5.7% and likely to go further (as is BOQ which moved up 3.1%). SLR fell 11% and has been removed this week (although it is at a significant low and could/should recover). XRO fell 3.9% but this seems to be a retest of support and it remains in play.

I’ve added BFG, IFM and SWM to my Stocks to Watch this week.

Contact

Robert Norman

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

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