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Another tumultuous week which saw (personally) good gains until Friday came and swept it all away. The pundits all seem to say Australia’s fundamentals are OK and it is all down to fear of rising interest rates and a likely downturn in the USA.

The charting outlook for the XAO is little changed with the index having hit resistance around 7,900 as it has now done 3 times since August last year. Should price again fall back to 7,500 as it has also done 3 times since August things are less rosy with the XAO having made a triple top – a very strong predicter of bigger falls ahead. If (as I suspect) price rallies again after this current kneejerk reaction to make a new high, that would negate the triple top and we live to fight another day. And, from a technical perspective double and triple highs over a short time frame like this need to be almost exactly the same peak and there is enough difference between the two previous peaks and this week’s to make me think that criteria has not been met.

XAO 22Apr22

Needless to say many stocks chart outlook took a dive this week and of last week’s Stocks to Watch only PME moved up, with PDN and RRL falling by 15% and 10% respectively. I’ve removed PDN, OZL and ASM because their charts are now less supportive of a quick turnaround – but that’s not to say it can’t happen. PDN still has a pattern break that suggests higher prices (but it is hard to argue with a 15% fall in price) and both OZL and ASM made lower lows – suggesting lower prices to come.

I’ve added FLT, COH and BPT this week. All have positive charts and FLT is likely to benefit in the resurgence of international travel, COH has broken up out of a pennant pattern (high probability of further rises) and BPT is likely to benefit from the escalating energy crisis in Europe. All three stocks rose last week.

With the Dow Jones having fallen 2.8% Friday night, the outlook for Monday here isn’t exactly bright. Hopefully, the US was just a reflection of our Friday fall and the bargain hunters will be out and about next week. The XAO is at a band of support and providing it doesn’t fall below 7,700 on Monday the chances of the market living up to my expectation of hitting 8,000 remain good.

A closing word of warning. The elephant in the room at the moment is China, not because of their aggressive attitude towards anyone who they feel doesn't support their China first view, but because of the damage Covid may do to their economy and in turn ours. Their government seems hellbent on maintaining a Covid free policy despite (if you believe media reports) that policy resulting in scenes more likely found in an end of civilisation dysposian novel than a world leading economic power. For me, my money is on the virus winning that struggle and while ultimatley China will, like the rest of the world, survive to live with Covid, ithe short term economic upheaval could impact our China dependent imports and exports and the share price of some companies. 

Contact

Robert Norman

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

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