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Thank God reporting season is over as it has been a feast or famine depending on the mood of investors. Some companies reporting arguably good results, but not providing future guidance, were shot down in flames while others like Z1P, where investors were hoping for a maiden profit only to see an eye watering $650M loss (a 3,000% decline!) saw their prices go up (or in the case of Z1P, little changed).

The US market (and hence the ASX) has been nervously awaiting a US Federal Reserve announcement regarding changes to their quantitative easing program this weekend. It seems the announcement was largely ‘steady as you go’ so I expect prices will recover next week. While I still wouldn’t be necessarily surprised to see the XAO fall back to 7650,  yesterday’s (and last week’s) candles indicate a rise is more likely. The weekly candle closed higher than it opened, and Friday’s candle closed in the upper half of its range. The candles are both hammers (the weekly is an inverted hammer). Both of these candle shapes signify a probable reversal (although ideally I would have liked to see a longer wick on both).

My own trading was a mixed bag with strong stocks like ABC, COH, BXB and FPH all pulling back – although IFM was the pride of the litter, up over 12% (something I suggested might be possible 2 weeks ago).

My diversified medium-term educational portfolio was down 0.8% for the week against the XAO’s 0.45% improvement (but still up 20% over 9 months).

In late July I posted on a trading forum about the merits of trendline trading and quoted a list of shares that had broken trend recently. Now, a month or more on, the table in the chart below shows their performance for the current month (over which the XAO rose 1.25%). Their results were quite strong when you look at the reversal several of them incurred during the pullback over the past two weeks - even KGN improved over the month despite its big fall last week.

DT breaks July

My Stocks to Watch from last week were (like the market) showed mixed results with WTC rising 29%, IFM 12% and ECX 8.7% -  while ABC fell 11% and KGN 16%.  This week sees the removal of ABC and KGN (for obvious reasons, although I expect ABC should recover more quickly than KGN). I’ve also removed ECX and WTC because they have moved up close to potential targets and hence may have largely run their race.

I’ve added NAB to my list this week as it seems to be working on a break above resistance at $27.80 – something that would suggest a short-term target of $30.45. A number of the banks look to have good prospects at the moment and while you will never make a fortune trading bank’s short term, now could be a good time to think about adding NAB to a long-term portfolio.

Contact

Robert Norman

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

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