Weekly Blog - 24 September 2021

Another week that saw big losses on Monday gradually clawed back over the next 3 days, but ending lower after a small pull back on Friday – albeit on lowest volume for the week, given Melbourne’s public holiday for a football match it can’t hold due to Covid.

Last week I said I saw support at 7,483 for the XAO and (remarkably) as the chart shows, price bounced off that level. The next test is whether it can break above the line of overhead resistance at approx. 7,750 for a short rally towards 8,000 and possibly beyond. A break higher could give a target of 8,300 – although I think selling pressures would probably see any immediate rally fall short of that number. Any rally above 7,900 should be considered as being on borrowed time.

The XAO fell 0.7% for the week whereas my own portfolio and my educational balanced long-term portfolio both fell back around 2%. Whether you were in front or behind this week (as always) depended on what sectors you were invested in with materials falling 2.7% and gold down 4.0%, while energy was up 4.9%.

Gold remains a disappointment with the sector seemingly unable to find a bottom after making another new low this week. That lower low in charting terms suggests even more falls ahead, although the current price is also now at a level other charting theories suggest should be a floor.

My Stocks to Watch this week sees VCX deleted as its price has fallen back and the pattern less likely to play out. AIA, WES and REA have been added. AIA rose 3.5% for the week to break out of a sideways pattern that has held it rangebound since the start of this year. It has a potential target of $8.30 but with Covid issues still front and centre, any material push up could see headwinds. WES is coming off a low and is more of a long-term play, whereas REA rose 7.7% this week to close just below resistance at $172. A confident break and close above that level could suggest a target near $198.

Overall, the charts of many stocks are pointing in the wrong direction and don’t provide an encouraging outlook. Today I scanned the entire ASX 300 to see what stocks met the buy criteria I suggest anyone without a lot of trading experience and/or charting knowledge. This is a simple buy when a stock is nearer its lows than its highs and has broken above a technical 12 week downtrend line for 2 consecutive weeks. I only found 13 – and that lack of traditional buy signals should give all traders pause for thought. Many stocks have made trend breaks some time ago and are still climbing, but having risen markedly they are more likely to fall than rise significantly further. Others have broken downtrends recently only to fall back (a fall after a break that sees price go below the last trough before that break above trend is a sell signal). Many others are threatening to break above downtrends, suggesting good buying opportunities may arise once the corrections I see ahead (or happening) has blown over. I don’t intend to analyse in detail those 12 potential trades, but here’s a quick overview:-

BPT seems to meet those requirements after rising 11% last week. I say ‘seems’ because it isn’t possible to draw a technical downtrend along 3 peaks but a line of best fit suggests BPT may have broken above trend for 1 week and should that become 2 close above trend next week, it would be a buy.

CNU has been falling for a few weeks and could be a buy if it moves up (making a break above the short-term downtrend on the daily chart would be a start).

INF A low value stock that seems to tick all the boxes. Making higher troughs and peaks but would feel more comfortable were it to break above $0.16. While I like the chart, I prefer to trade companies with proven profitability/expertise – so will pass.

NXL has rumours of potential misleading listing documents and given that history it is not for me.

OPT has moved sideways for 6 weeks but while meets my buy criteria, it is not yet a profitable operation. Again, like INF, it is not a profitable operation so I will pass.

ORG has had its price savaged over the past year or so and it has made 2 valid downtrend breaks in the past 12 months where buys would have led to losing trades. There is nothing to say the recent break won’t lead to another and I’d want to see an uptrend form and/or prices move above $4.90 to buy in. From a charting perspective it is interesting to see these prior breaks on the chart. As they unfolded, each would have been valid buy signals, but when price subsequently rolled over, a new downtrend unfolded to repeat its trick of sucking in the punters. I do think ORG has promise, however – the problem is when!

ORG 24Sept21

QAN has been a historically a difficult stock to trade and price hasn’t really gone anywhere over the past 12 months. Price is at a very strong past level of resistance.

RBL’s price has fallen heavily over the past 6 months but the recent break meets our criteria. It has made a higher trough and is price moves above $4.50, that higher peak would suggest a buy was possible.

RED is a small gold explorer with a market cap of $480M yet to show a profit. I like the chart but prefer to trade companies with proven profitability/expertise.

SPL has fallen more than 50% this year but it is at a level I consider to be a bottom and has made a strong break higher. If the move up is a change of trend then it is probably on an Elliott Wave 5 which suggests a peak above $2.50 in the longer term. The daily chart shows higher troughs and peaks and I’d give SPL the stamp of approval. However, it is a biotech and like gold explorers they often don’t show profits – so based on my comments about RED I’d probably pass on SPL in this market.

TPG is a $12B company that has been rising slowly (but with volatile moves along the way). My principal concern is that I can’t find a valid Elliott Wave count – meaning that I’m unsure where it is on its current price cycle. While it hasn’t confirmed a valid uptrend line (only 2 troughs and we need 3 in a line) it has confirmed a 12 week uptrend and is making higher troughs and peaks. A buy for me.

So, out of an initial 300 stocks I found 13 possible trades, which in the end distilled down to just 1 buying possibilities – TPG.

Weekly Blog - 17 September 2021

Another week of promise where the dark storms of Friday clawed back all of the prior 4 days gains.

My hypothetical long-term educational portfolio closed up 1.1% and my own trading was 2% in the green (making up for a poor showing in the previous week) – both good results when the XAO only broke even (down 0.4%).

Gold continues to be an ongoing disappointment for me as I felt it was moving up from a bottom, but Friday proved me wrong on that count. I had NCM in my educational portfolio as well as my personal trades (although the latter was just part of an earlier larger trade that had already been sold down). Both these holdings will be sold on stop loss come Monday unless NCM opens with a rocket under it.

The XAO remains bearish now having made a lower trough followed by a lower peak and another lower trough. While last week’s candle was a doji, suggesting a reversal and higher prices this coming week, Friday’s US market was lower and our futures are down almost 1%. It’s hard to see much joy in the charts this weekend.

I did have 3 small flutters this week on NVX, ABR and NMT because they all had strong potential for short-term gain. NVX obliged with a 14% windfall for a 24 hour trade, while the others moved back a little on Friday.

BXB was the big loser this week (down 9%) and I did something I tell people not to do. I’d sold two thirds of my trade a couple of weeks ago (which was opportune) but I bought more at the low on Tuesday as I couldn’t see any real reason for the big fall and felt that BXB would probably recover (it has picked up 3.5%). However, doubling down is a really, really bad way to trade.

On the positive side of my ledger JLG rose 7.7%, TRS, IFM and LYC all added between 5% and 6% for the week.

With Stocks to Watch I’ve deleted BXB (for obvious reasons) along with SFR, NAB and MIN, who have all lost their immediate promise. I’ve added TLS (an old chestnut) and TRS who now seems to be on the road to recovery.

Weekly Blog - 10 September 2021

My comments on the XAO pretty much says it all this week.

In short it is a time to consider whether it is time to exit positions that are underwater or not performing as planned.  This is not (yet) a case of "The Sky is Falling" and the best advice is not to panic, stick to your trading plan, watch your stop losses and err on the side of conservatism. It is worthwhile still keeping an eye out for the occasional speculative short-term trade opportunity because, as my blog says, even in a falling market there will be opportunities with stocks that (unlike the market) are moving up and closer to their lows than their highs. Those stocks are better predisposed to achieve gains from pattern and resistance breaks – but always remember if the larger market is trending down, individual stocks that are rising are effectively swimming against the current and may fall short of target expectations.

The best outcome would be for the market to quickly correct to somewhere around 7000 points to open up new trading opportunities as prices again move up. The most likely scenario for a time is a period of sharp short-term rises followed by equally savage falls. It is possible that the improving Covid vaccination rates and a release from lockdown on the horizon for Sydney and Melbourne may see some misplaced enthusiasm from the ASX. While I'm suggesting lower prices are more likely there is nothing that says they can't go the other way - which is exactly what happened back in 2006 before the GFC. Perhaps we'll see that same pullback as May 2006 as the chart then showed exactly the same large and small price channels as it is today. Prices corrected by 12% only to push up 36% and out of the price channel until another 15% correction 12 month later, followed by those losses being recovered (plus some) before the GFC arrived, bringing a bear market and a 55% collapse in the XAO. Sound like fun? It wasn't. And yes, history does repeat - especially so in the case of the stock market. XAO longterm

 XAO May2006

No new stocks have been added to my Stocks to Watch as the negative market sentiment has impacted most emerging opportunities for now. As could be expected most of the listed stocks from last week fell back, however, most retained their potential to recover if the market does change sentiment and move up. I have removed MQG because it achieved my target and has since fallen back; BFG as it broke down out of the pennant pattern I had been watching; and IFM suffered a significant reversal in price.

Weekly Blog - 3 September 2021

The XAO pushed up 0.86% for the week and remains well placed to achieve 8,000 points (my current target is 7,969).

There were some big gains across the board with 17 shares in the ASX 300 rising by 10% or better – MYX being the leader, up 25%. A reversal of iron ore prices contributed to BHP’s 5.3% decline.

My educational medium-term trading portfolio rose 1.7% and my personal trades were up by 2.0% - in part helped by a 2 day trade in NVX which netted a 17% profit.

There are an increasing number of short-term opportunities showing up for the chartists watching pattern and resistance level breaks. I remain concerned about the market’s ability to continue to rack up new all-time highs and while prepared to punt the odd share like NVX I’m opting to generally keep to a more conservative approach of holding mainly strong value stocks like MQG, COH, FPH, CSL, BXB – to name a few. I sold BXB on Friday to take some profit and reduce my exposure to that stock. I normally don’t sell until a stop loss breaks, but BXB’s movements of late have been more exaggerated than normal and I just felt it was time for a change. I bought into JLG this week because it is a stock that trends beautifully and it recently had a bit of a pullback to trend. It rose 7% for the week.

Investors streamed back into travel stocks this week, prematurely in my view given there is little likelihood of extensive international travel on the horizon for some time and even domestic travel may take some time to be realised in the hermit kingdom’s of WA and Queensland. I suspect burgeoning Covid cases in Vic and NSW will ultimately find their way over the border and their Covid-free aspirations proved to be a myth.

All but 2 of my Stocks to Watch rose and I see no reason to remove any from my lists. I’ve added JLG, VCX, SFR and MIN (the latter showing a potential 30%+ gain) – although there are numerous other contenders in this rising market

Hopefully, the market can push on back up to new highs this week – good luck to all.

Weekly Blog - 27 August 2021

Thank God reporting season is over as it has been a feast or famine depending on the mood of investors. Some companies reporting arguably good results, but not providing future guidance, were shot down in flames while others like Z1P, where investors were hoping for a maiden profit only to see an eye watering $650M loss (a 3,000% decline!) saw their prices go up (or in the case of Z1P, little changed).

The US market (and hence the ASX) has been nervously awaiting a US Federal Reserve announcement regarding changes to their quantitative easing program this weekend. It seems the announcement was largely ‘steady as you go’ so I expect prices will recover next week. While I still wouldn’t be necessarily surprised to see the XAO fall back to 7650,  yesterday’s (and last week’s) candles indicate a rise is more likely. The weekly candle closed higher than it opened, and Friday’s candle closed in the upper half of its range. The candles are both hammers (the weekly is an inverted hammer). Both of these candle shapes signify a probable reversal (although ideally I would have liked to see a longer wick on both).

My own trading was a mixed bag with strong stocks like ABC, COH, BXB and FPH all pulling back – although IFM was the pride of the litter, up over 12% (something I suggested might be possible 2 weeks ago).

My diversified medium-term educational portfolio was down 0.8% for the week against the XAO’s 0.45% improvement (but still up 20% over 9 months).

In late July I posted on a trading forum about the merits of trendline trading and quoted a list of shares that had broken trend recently. Now, a month or more on, the table in the chart below shows their performance for the current month (over which the XAO rose 1.25%). Their results were quite strong when you look at the reversal several of them incurred during the pullback over the past two weeks - even KGN improved over the month despite its big fall last week.

DT breaks July

My Stocks to Watch from last week were (like the market) showed mixed results with WTC rising 29%, IFM 12% and ECX 8.7% -  while ABC fell 11% and KGN 16%.  This week sees the removal of ABC and KGN (for obvious reasons, although I expect ABC should recover more quickly than KGN). I’ve also removed ECX and WTC because they have moved up close to potential targets and hence may have largely run their race.

I’ve added NAB to my list this week as it seems to be working on a break above resistance at $27.80 – something that would suggest a short-term target of $30.45. A number of the banks look to have good prospects at the moment and while you will never make a fortune trading bank’s short term, now could be a good time to think about adding NAB to a long-term portfolio.

Weekly Blog - 20 August 2021

With an overheated market such as we currently have anything will trigger a pullback and a week or two of lower prices could be expected. Our market fell by 2.2% (XAO) last week on issues such as Covid being rampant in Victoria and NSW, the US Federal Reserve proposing to reduce stimulus, and some profit results falling short of investors’ overly optimistic expectations.

Interestingly, from a charting perspective, price fell exactly to the upper boundary of an underlying long term price channel (see my web site for XAO chart and detailed analysis). That support could see price rise. Price also fell into a time line (vertical black line on chart) which, without getting into detail, also suggests a likely price rise next week.

Gold seems to be on the brink of a recovery. See my analysis here.

My own portfolio fell by 0.8% and a hypothetical long-term ‘How to Trade’ portfolio I run for training purposes fell 2.0% but is still 19% up over the past 9 months since it started. My biggest falls were COH, ILU and NCM – all down about 5.3%. Biggest risers were FPH (up 6.7%) and ASX (6.2%).

I’ve deleted several stocks from my Stocks to Watch page

AIA: Should still break higher out of its sideways pattern but timing uncertain due to ongoing Covid issues.

COH, LYC and SWM: All fell sharply last week and while they should recover their previous outlook is negated for now.

EOS: Needs to break downtrend but price is falling away.

I have added FPHand MQG to my list.

Weekly Blog - 13 August 2021

A bit of a mixed bag this week and many investors’ fortunes did not reflect the 1.2% rise in the XAO. Reporting season pushed some stocks that reported strong results higher while in other cases positive results were punished for not being positive enough – the damned if you do and damned if you don’t outcome.

Both my own portfolio and my hypothetical long-term portfolio fell (down 0.7% and 0.1% respectively). I had some bright spots with SGM up 9.6% for the week and IFM up 6.71% (but bought during the week so only 2.5% in my pocket) while my gold holdings (NCM, NST, EVN) all fell about 5% on average and dragged my average down. Those gold shares are all hanging around their stop losses and I sold 50% of my NCM holding this week as a result. I also sold STO (down 0.5% for the week) and CUV (up 1.9%) because I felt uncomfortable with their price movements and their potential to fall further (although CUV could be a buy back if price continues to move up). TCL was also closed out because it simply hasn’t performed up as expected – and probably isn’t going to, given it dropped back 5.8% this week after a mediocre profit result. In short – this week saw a bit of spring cleaning to cull my non-performing trades.

As for the market ahead it would seem the strong reporting season results will push the ASX still higher. My long-term target of 7,833 for the XAO was achieved last week and my secondary target of 7,969 is also close at hand. There is nothing that says the market can't continue to climb past these targets but everything starts to look overbought and the potential for a correction continues to ramp up until something gives. Looking at the charts this weekend, many have made reversal candles and I wouldn't be suprised to see a small correction next week, but as noted, assuming the strong profit results continue it would need a significant trigger to materially turn the market. On that note, it is now a definite possibility that Covid will not be reined in in NSW (thank you Gladys and the LNP!) and possibly Victoria (although they are in a better position than NSW). Neither State or Federal governments can afford to lockdown both states until 70% vaccination is achieved and they will need to come up with a Plan B. That could be to release the lockdowns so businesses can continue to operate while strictly enforcing social distancing requirements and banning all form of gatherings and events - in short largely leaving it up to the population to vaccinate with Astrazeneca (and Pfizer where available) ASAP or suffer the consequences. Many small businesses would go to the wall in either this hypothetical scenario or an extended lockdown - and if a runaway Covid outlook is confirmed it would likely be the trigger for a market correction of perhaps 10% to 12%.

Stocks to Watch were a mixed bag with WTC moving up 5.7% and likely to go further (as is BOQ which moved up 3.1%). SLR fell 11% and has been removed this week (although it is at a significant low and could/should recover). XRO fell 3.9% but this seems to be a retest of support and it remains in play.

I’ve added BFG, IFM and SWM to my Stocks to Watch this week.

Weekly Blog - 6 August 2021

The XAO jumped 1.9% this week, the biggest rise since the end of May. Whether your own portfolio achieved this result will have depended on what you were holding as the big rises (like APT’s 36% rise and PLS’ 18%) were localised. 25 of the ASX top 200 bettered 5% for the week and of those only 6 exceeded 10%. My long-term paper portfolio returned 0.3% and my personal portfolio 0.2% which are probably more representative of most conservative portfolio performances.

The IT sector (not surprisingly) was up a staggering 13.7%. Financials gained 3.1% and gold fell 1.7% (Again - bugger!).

The XAO closed just above 6,800 just 27 points short of my current target for the index – close enough in percentage terms to consider that target as achieved. Having closed at its highs this week, there is every chance the XAO will continue pushing higher next week.

The call for final drinks is getting louder with the XAO having broken up out of a price channel that has held for 13 years and is right at the top of a smaller price channel in force since November last year. Yes, I see the market could still go a little higher, but the likelihood of a correction is now extreme.

XAO 6 Aug 21

My own portfolio showed no trades moving materially. The largest risers were SWM (up 4.1% and bought this week) and SGM (+3.7%). The only noticeable moves down were once again my goldies (NCM, NST and EVN) all of which fell about 2% and restrained my overall gains.

Last week I scanned the ASX top 200 for stocks that had broken above a significant downtrend (a strong technical buy signal). It is interesting to see this week how many of those moved up strongly. On Monday I ‘bought’ one of those stocks, ASX, for my paper long-term portfolio only to see it up 6% by Friday. In my own portfolio I bought BOQ which made a pattern break and was up 3% for the week.

DT breaks July

My Stocks to Watch list of last week mostly rose with ABC, WTC and XRO the outperformers with rises of 8.5%, 7.7% and 6.0% respectively. I have removed TCL (closed below an uptrend), FMG (fallen strongly in line with Fe prices) and DOW (price seems to be rolling over and making lower lows). I could add almost any of the stocks on my trendline break list from last week but have chosen to add only KGN and SWM. KGN is coming off a significant low (most probably a bottom). Price rose 9% this week to reach overhead resistance in the form of a downtrend line. A break and close above $11.35 would signify a break of that downtrend and $12.35 would see a higher high. I’d like to see 2 consecutive weekly closes above that downtrend before considering a buy (and even then that would be an early jump back in with significant risk). SWM has broken up out of a pennant pattern which usually has a high success rate of predicting strong price rises. The potential target the SWM pattern suggests would see a 40% gain on Friday's close.

Contact

Robert Norman

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

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