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If you look at my last couple of blogs I was hoping the XAO would rise from its support level of last week, but if it fell through that I said 7500 was likely to be the next stop on the way down – it closed at 7490 on Friday. Last week’s candle on the XAO was the most bearish since the Covid crunch in 2020 and there is a chance that such a high level of momentum could see prices break lower into a correction. The level of support price is sitting at has turned price 3 times in the last 6 months so I’d expect it to do that again. However, the US fell back again in Friday trading, putting the Nasdaq well into correction territory and the S&P not far off. If our market follows that lead Monday and fails to close above this week’s close then, from a charting perspective, we’re on thin ice. Hopefully, the local market could be seen as oversold and bargain hunters might kindle a recovery.

7,700 was a level of support last week, but as price broke lower it now forms overhead resistance to price rising and if price struggles to break above 7,700 that could improve the odds of a correction.

7 of my 10 Stocks to Watch fell. ADO rose over 15% and the 2 new additions last week (BPT and NCM) both gained ground. PDN (down 12.5%) was the worst performer and should be dropped, but price is so close to the support of the lower boundary of the pennant pattern price has been building, I have left it there. I thought PDN might break up out of the pattern 2 weeks ago and have had a conditional buy on it ever since. As that buy is conditional on price making a new weekly high (something that hasn’t happened) the tradehasn’t triggered, and I’ve been protected from the falls. It is a good example of why conditional buys are my preferred way of entering a trade.

Two of my trades, CSL and WES, have both broken below trend for 2 weeks and will be sold Monday.

Gold is looking bullish at the moment and the following is an extract from a post on a trading forum I follow –

From a charting perspective the gold sector has started to show signs of life and the sector chart is a technical buy, having broken a technical downtrend and made higher weekly troughs and peaks.

Goldsector 21Jan22

However, the descending blue dashed line is resistance that the sector needs to break above.

Not surprisingly, physical gold is also bullish but needs to break and hold above about $1,860 to get above a long-term level of resistance.

GLD 21Jan22

The only thorn in the side of Gold is higher interest rates – which tend to devalue assets like gold that do not generate income.

Good luck for next week – we may need it!


Robert Norman

Phone: 0428 346 951

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