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Two weeks ago, I suggested the XAO had made a technical pattern that had a target of 7,205 which was also a strong level of resistance. The XAO reached 7201 last week and has hovered around that level for most of this week but closed a little higher Friday at 7,250. Price seems to be tracking along the upper boundary of a rising price channel.

Another charting pattern (a pennant pattern) can be found on the daily chart and while I don’t normally base pattern analysis on daily charts, this one suggests a target of 7,245 – which is pretty much spot on Friday’s close. To me this suggests lower prices wouldn’t be unexpected next week as prices often pull back after reaching targets.

XAO 5 Aug22

With large amount (like 7,200) 50 points doesn’t constitute a break in my book given it is still less than 1% of the index value. I consider price still ‘at’ resistance. That said, the weekly candle closed at its high and that normally suggests price could keep going – so some mixed signals here, but I’m leaning towards a pullback next week.

So many stocks are breaking downtrends that the list is too lengthy to keep updated. My preferred pattern is the old Cup and Handle or Resistance Break – so I’ll limit my comments to stocks having confirmed that pattern.

Of the Stocks to Watch listed in my last blog 2 weeks ago, ARB and DMP were simple downtrend breaks and have been removed. Interestingly, they were the only stocks in my pick to drop back while all the other with resistance breaks rose for the week. CXO up 11.3% was the best performer. CXO has also reached its suggested target which mean it could be time to watch for a strong reversal in price. It is also the reason it has been removed from this Blog’s Stocks to Watch.

CAR has made a resistance break and could see $24.00 – so it is a new listing (and the only one I could find in the ASX 300).

PNV was a listing last month that I deleted 2 weeks ago when it achieved its original target. I bought into PNV at the time I saw the original pattern, and since then it has risen 33%. Monday could be time to bail out I suspect.


Robert Norman

Phone: 0428 346 951

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