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With two corrections in a short period of time and storm clouds gathering based on the increasing likelihood of a global recession, the conditions for share market investment are challenging.

With there being little to say over the past few weeks as the market has been unwinding, I can't see the point of continuing weekly blogs of unfullfilling content, so until market condiitons return to something resembling normality I'm only going to post a blog when there is something worthwhile saying - hence the Weekly Blog has had a name change to Not the Weekly Blog!

I saw an ad in The Age today along the line of ‘even in the gloom some things bloom’ – and that’s the current problem. We’re in a falling market but we keep seeing short rallies that seem to suggest the bottom has been reached. The dip buyers and the hopefuls race back in – and then the next day or two sees falls that wipe out many of those gains.

A scan of the ASX 300 over the weekend disclosed an unmistakable common thread was that many, many stocks had charts that were trending down (they might in some cases be in a technical uptrend, but their medium to longer term trend was down – in some cases like the glide pattern of a brick.

In a falling market patterns suggesting potential rises still occur, but most don’t go on to fulfill that potential because they are fighting against an outgoing tide.

So what to do? Manage your existing trades out – if they go up, stick with it and if they fall, sell when they break stop losses. If you feel the need to maintain an investment in the market, then what to buy? In my view the answer is only good solid and importantly, profitable companies whose price is nearer their lows than their highs, trending up and ideally broken a recent downtrend.

With my scan of the ASX 300 I only found one stock (CGF) that seems to have recently broken above a resistance level of the type I know to be generally quite reliable. That break suggests an initial target of $8.80 and a secondary target of $9.59. CGF has been generally trending up since its March 2020 low and may turn out to be a good long-term hold.

I found 8 stocks that all showed recent breaks above downtrends that suggest potential buy signals. As it isn’t possible to say much more than that (ie. they show potential and a downtrend break is a technical buy signal) I don’t intend to post detailed analysis on each. Those stocks were – AD8, AZJ, BPT, CSL, DOW, JDO, KLS and MND. JDO is a relatively new listing and as such there is insufficient data to undertake meaningful charting analysis, however, the downtrend break still makes it one to watch.

I also saw 2 stocks (ORG and ORA) which continue to trend strongly. Both have shown downtrend breaks recently, made new uptrends and generally showed higher weekly troughs and peaks, making them strong candidates for long term holds. However, just to prove Mr Murphy is always hanging around to ruin your day, ORG closed down 14% on June 1 following a profit warning due to supply issues re coal.

In summary, my Stocks to Watch come down to a single entry this week - CGF. Just like it is a relatively pointless exercise trying to write a weekly blog when there is really nothing (or very little) new to say, it is equally pointless identifying stocks with charts that say they could rise when the prevailing market conditions probably means they won’t. Going forward I’m only going to list stocks that like CGF have completed a resistance break (cup and handle if you prefer that description) or a flag/pennant pattern that a price target can be deduced from.

Difficult times may be ahead for a while I fear so keep your eye on your stop losses and tread carefully.


Robert Norman

Phone: 0428 346 951

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