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Having been away from my desk for a week or so I haven’t had time to update my XAO analysis or look at Stocks to Watch.

From my last listed Stocks to Watch I’ve deleted:

SLR: Price has risen 50% since it started its current run up. Nothing lasts forever and while it may go higher, it needs a breather – and as such a buy now would come with reasonable risk.

JLG: Price has reached the top of its probable range and a buy would come with some risk.

Potential additions are many and a brief summary follows. As I like to keep Stocks to Watch to a limit of 10, I could only pick 3 of the stocks listed below. Once I include a stock I leave it listed until it suggests it may not perform as planned – to allow for the fact that sometimes patterns take several weeks to play out. I’ve chosen to include EVN (gold seems to be on a roll), IFM (coming of a significant low means higher potential gain) and FMG (broken a very significant reversal and Twiggy always seems to kick a goal when he’s down).

EVN, FMG & ORI: Have all broken downtrends recently and coming off significant lows. Many mining stocks seem to be having something of a resurgence. Gold has broken above a long term downtrend suggesting gold stocks in particular probably have good potential.

ECX has been range bound in a rising price channel for 18 months and being at the bottom of said channel there is every likelihood price will bounce up to the top channel and an 18% gain for those agile enough to get in and out quickly.

CGF could jump up to break resistance at $7.22 and if so could make a target of $9.70

ASM: As a relatively new listing, ASM is not my usual ‘cup of tea’ but could break above $14.00 for a target of $18.80

TLS: Seems set to continue its run higher and after struggling to get above resistance at $4.00 it seems to have made that break to suggest a target of $4.23 – but the potential profit from current price may be a bit thin to justify a buy.

IFM: One for the thrill seekers. After a big drop due to the CEO moving on, price has started a significant recovery. Assuming prices return to their previous levels there is a 20% potential gain. A possible price channel supports this view.

BFG: Broken out of a long term falling flag pattern several weeks ago and has risen strongly since. With price currently around $1.85 the pattern suggests price should recover above $2.00 - and a break above $2.00 would suggest a target of $2.40

ARB: Has been rising strongly and a break above $54 suggests a target of $62.

i'll try to update my detailed analysis on the above stocks as time permits.

XAO

The XAO pulled back 0.5% in a lack-lustre week just gone. My own portfolio closed exactly where it started the week - and I'm calling that a win given the fall by the larger market. My educational trading portfolio fell heavily by 1.4%, being its first reversal for some time. That portfolio remains up 24% for the past 12 months.

The XAO is still in the control of several price channels. One large channel that has contained price movements for 13 years.

XAO 19Novbig picturePrice is currently at the top of that range and could struggle to make any material or lasting breakout. A correction to 7460 or 7170 remains a high probability. Since the Covid fall of March 2020 price has formed a smaller rising price channel and while subject to the overarching constraints of the larger price channel, it is possible, were price to break above 7840, make a short run up to 8200. Achieving 8200 would see the correction potential rise to a point that the dam may burst and we fall back to 7500 or thereabouts (a fall of roughly 10%). That would still leave prices near the top of the larger channel, suggesting a bear market could still be needed to ‘reset’ the market. This is all pure conjecture and it needs to be remembered that price channels are just indicators. Look back at pre GFC times and you will see that prices rose more than 100% above the upper boundary of what seemed a good price channel at the time.

Finally, there is even a larger price channel that stretches back to the start of my data in 1982. The larger the channel the stronger its boundaries and this larger channel suggests a top of 8400 could be a ceiling.

A few weeks ago I posted that most recent rallies in the XAO have followed the same momentum (the black lines drawn on the chart).XAO 19Novsmall

I suggested that the current rally could follow that same momentum, but it has fallen a bit short with momentum being lower. This is possibly another sign on the market slowing down and starting to ‘roll over’.

There are a few competing views here, but in summary my expectation is still for the market to move up to around 8200 or even a little more and then correct. This is not a time to take risks and I have materially derisked my own portfolio. Stick to your winners but jump out of trades when they clearly break stop losses. Good luck.

Contact

Robert Norman

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

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