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Nothing has changed with the market outlook since last week, other than mutterings about inflation and higher interest rates have become louder (and anecdotally responsible for this weeks pullback). I suspect the market has now factored in the inevitability of rate increases and after last week’s knee-jerk reaction, next week might be business as usual.

Covid remains a drag on confidence but there are signs that in some countries the incidence of Omicron may be peaking. If that suspicion is proved correct, expect an uptick in confidence and market activity. Our Covid peak is estimated as likely to be reached in a few weeks – not months.

To repeat previous Blogs – the XAO is travelling in two price channels, one large (light green) and one smaller (dark green). Since the start of December price has respected the lower boundary of that channel. Assuming that continues (and it certainly doesn’t have to) price could fall a tad to support at 6650 and then (hopefully) move up to finally break above 7900. 7900 is a very strong level of overhead resistance and is likely to put up a fight.

XAO 14Jan22

For the last 3 weeks, opening and closing XAO prices have moved in a range of only 50 points. Also the last 2 weeks candles (unsurprisingly) suggest indecision – although the lower volumes of the holiday break may have skewed that analysis. With some stocks experiencing quite large moves (both up and down), I suspect the pressure is building for a bigger move in the market in general, however, this is probably not a time to try and second-guess the outcome with your chequebook.

There are some really interesting long-term charting patterns being built by many stocks and I hope to find the time to publish a short video explaining a few of these.

Stocks to Watch were a mixed bag (as one could probably expect in these market conditions). ADO rose 14% while ARB was down a similar percentage and BFG fell 10%. I’ve deleted ARB and BFG from this week’s list – although BFG very well may kick a goal soon, given a long-term pattern it is following. PDN hasn’t broken up out its pennant pattern as hoped and looks as if it may retrace to underlying support before having another try. However, it is possible last week’s pullback was the last gasp of sellers and this week will see a move up. I’ve left PDN on my list for now. Gold has been suggesting it has bottomed for almost 12 months and after a failed rally starting last March and ending on October, perhaps last week’s rumblings of life will see that sector push up (up 3.8% last week). Accordingly, I’ve included NCM this week. CIM was a contender based on it being near a low not broken for about 17 years (apart from the Covid March 2020 fall). It is also making a pattern that suggests it should now move up making generally higher weekly peaks for some time. Interestingly, it has made a double bottom pattern - something suggesting a strong push up is ahead and CIM may be a good long-term hold. As for Stocks to Watch, with only one stock able to be added) I’ve included BPT as it is building a short-term resistance break pattern.

Contact

Robert Norman

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

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