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The XAO fell 0.7% this week and after 4 straight weeks of falls it is back to where it was 6 months ago. 7,500 has proved a strong level of support and after falling to that level last Monday, prices have bounced along sideways. If price follows its recent dance card it should move back up to around 7,800 in the leadup to the Xmas break. Should it break lower and close confidently below 7,500 – expect even lower prices to follow.

The XAO has made several price channels within price channels and while it is difficult to untangle what these channels suggest about where price might go, I can see an argument that says price has fallen to the bottom boundary of a channel that goes back to the Covid tumble in March 2020. Theory suggests that price ‘could’ now move up to break out of its recent trading range towards the top boundary of that channel around 8,300 – 8,500. On the chart below the black diagonal lines mark the momentum of previous short rallies and the most recent of those lines suggests where a new rally might head, were it to start now.

XAO 3Dec21

One the negative side, the XAO has been in a general shalllow downtrend since August – although importantly not a formal downtrend (were prices to now fall below 7,445 a formal downtrend would be confirmed). Charting theory says that when prices are in a downtrend, expect them to continue falling – although obviously they can’t do so forever.

Prices have risen during December and January for 5 out of the past 6 years – so let’s hope history repeats.

As for next week, while the US market was sharply down again on Friday it rallied in the latter part of the session which might carry prices higher on Monday. Our futures for Monday suggest a rise of 11 points although I’m not expecting much optimism from the market until a prognosis regarding the impact of the Omicron COVID variant is known. Let’s hope it is, as some suggest, simply mutating towards becoming a no greater threat than the common cold (which is thought to have originated from a bird flu that jumped the species barrier 200 years ago).

I’ve been feeling my Stocks to Watch has ‘lost its way’. I originally intended this to be a list of stocks that had charting patterns that suggested an increase in price was probable. As chart patterns may take a short time to be proved right or wrong (prices may even fall before moving up) I have been leaving stocks listed until they prove the analysis correct or otherwise. I’ve decided to revert to the original concept – only list a maximum of 10 stocks whose chart suggests prices may move up.

I also have not updated Stocks to Watch for a couple of weeks as I’ve been taking some time off and the market has been falling back, possibly even rolling over into a correction -  making chart predictions less reliable.

Seven of my previously listed stocks have fallen back or gone nowhere and while my review suggests they still may live up to their promise, in terms of my revised rules I have removed them.

I have added NUF, ORE, HUB, NMT, PLS, ARB and TLS with associated analysis to be found in my Stock Commentary – or just click the stock’s code here.


Robert Norman

Phone: 0428 346 951

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