Weekly Blog 8 January 2021

This week saw the XAO make a new high last seen almost a year ago. Importantly, this break higher closed above a resistance level, suggesting prices could keep moving up to 7,200 in the short-term.

The increase in price has not been equally distributed across all markets and sectors. My own trades usually show a better outcome than the XAO but since January 1 they have slipped back 1.1% while the XAO has increased 2.5%. While disappointing, trading has moments like this and in my experience you need to trust your analysis and not panic – or sell non-performing trades just to buy something else because ‘the grass is greener on the other side’.

Worst performers for me were MVP (-5.5%), ALU (-8.1%) and PAR (-5.5%). Bright spots did exist with LTR sold for a 13% gain. I jumped out of LTR too early when I saw signs of its rise appearing to falter, but it recovered and went on to increase another 15%.

I sold 50% of my trades in CSL and COH this week as these stocks have both broken below stop losses. I didn’t sell the entire holding because both were at a strong level of support and while they broke below said levels during the week, they subsequently rose to close at or above those support levels. I will rebuy both if they prove they are moving to an uptrend.

During the week I bought OSH, BPT, LYC and OBL

While my own trades are being somewhat recalcitrant, I’m running a hypothetical portfolio of 10 long-term holds for anyone who subscribes to my educational material. That portfolio rose about 2.5% since January 1. My Stocks to Watch last week included 16 stocks of which half rose but by much more than those that fell, with an average overall gain of 4%.

I also listed a portfolio of New Year’s picks on my Stocks to Watch page last week which I’ll review every month to see how they perform.

I’ve removed 7 of the Stocks to Watch on my last bulletin. Two showed significant moves up to near target and no longer represent value for money. The other 5 show price reversals that may only be support retests, but their overhead targets are now less certain of being achieved. Five new stocks have been added but there are many more that show potential - which may augur well for next week.

Weekly Blog 31 December 2020

After two short trading weeks and a market with little direction there’s not much worthy of reporting, so I thought I'd have a look at what 2021 might have in store.

it’s interesting to look at an annual chart of the XAO.

XAO annual candle

First the candle for the last year says it all – it stands out from previous years with its huge range (meaning it's been a year of extremes - which is stating the obvious) and closing almost where it opened. In Candlestick Theory a candle that opens and closes at around the same price is called a Doji and it signifies market indecision – which maybe sums up where we are at right now.

If we change to a line chart of the yearly closing prices it suggests each time price rises to the top of that shaded channel it is followed by a fall back to around the average increase in value of the XAO – shown by the blue dashed line. If this theory holds then it means prices could could close lower at the end of 2021 - it says nothing about where prices might go for the other 364 days.

XAO annual line

I’ve updated my Stocks to Watch page I’ve removed 4 stocks because their price has pulled back and as a result they show less potential. One new stock has been added –OBL.  Interestingly, MLX which I listed 2 weeks ago rose 12% this week following a 19% increase after being featured in Stocks to Watch.

Here’s wishing everyone a prosperous 2021!

Weekly Blog 18 December 2020

With no sign of the annual Santa Rally (a Covid cancellation by the reindeer?) it looks like investors will need to be content with the strong November lift in prices as compensation.

The XAO reached the magic 7,000 level this week but closed lower. The chart still suggests higher prices of around 7,200 to 7,400 are likely before our next material retracement. With the upcoming reporting season likely to be depressed by the Covid recession, perhaps this could be a time for our next pullback?

While the XAO managed a rise of 0.55% for the week, it was a mixed bag which saw large falls such as A2M down 22% on China worries. Despite the trade spat with China, the resource sector gained 0.23% - driven largely by gains in iron ore and gold (the latter rising by 5%). 

My own trading was break even this week with the only noteworthy event being MSB falling 47% on a cancelled drug trial. I sold almost all my holding in MSB weeks ago but kept a (fortunately) very small exposure in case they ‘kicked a goal’. Unfortunately it was an ‘own goal’. With little to lose I’ll see if the price rallies from the new lows, but I’m not hopeful.

PME which had been drifting lower to lose 15% of its value has turned up after reaching the bottom of its price channel. Price rose 8.5% for the week.

To free up some capital and protect profits I sold EOS and STO as well as 50% of my holdings in VOC this week. I see the possibility of further falls ahead before these stocks turn up again.

There were no buys last week as my capital was largely committed, however had that not been the case I would have taken a position in at least one (if not all) of ABR, MLX and MLD which I added to last week's Stocks to Watch page. They rose by 20.2%, 19.1% and 8.4% respectively - so not happy, Jan! (do you know that saying was coined by a 2000 Yellow Pages commercial?).

Stocks to Watch has had 3 stocks deleted and 4 added (WTC, NXT, NEA, PME). While there are certainly more potential trades out there, these 4 stood out as having strong potential.

A Merry Xmas to all and hopefully a few green days to finish off the year.

Weekly Blog 11 December 2020

The XAO only rose 0.3% this week but some sectors did well (Information Technology up 3.1%) and others not so good (Consumer Discretionary down 1.2%). In the main it was a fairly flat and uneventful week. The XAO made a reversal candle for the week and has paused near my previous target of 6,797. However, it has made a higher weekly trough followed by a higher high and price has moved up so there is a higher probability of price continuing its subdued climb to the top of the shaded price channel on the chart. Next week is another important week in the soap opera know as the US election and an (unlikely) Electoral College outcome would almost certainly cause the market to tank.

XAO 11Dec2020

Some traders are waiting for the mythical Santa Rally to help their trades over the next few weeks. I shouldn’t say ‘mythical’ because 6 of the last 8 Decembers have seen rises of about 2%. The two losing years were 2018 and 2019. This December is already up 2.1% so perhaps Santa’s been already?

My own portfolio rose by 1.4% overall with the best performers being CHN (up 14.2%), WGN (10.9%) and TRS (8.3%). The worst performers were PAR (down 12.1%), M7T (8.5%) and COH (7.1%).

This week I topped up STO and TRS and bought into LTR (up 22.6% although most of this was before my buy). During the week I sold CHN and WGN – both of which had neared or reached my target.

In an earlier blog I mentioned gold stocks as looking a little challenged given the probability of more falls ahead for physical gold. This week GOLD fell 1.7%, further supporting that outlook.

Nuix listed 4 December to double its issue price only to fall back 25% from its highs this week. However, it is still 53% up on the issue price – so a good deal for those that bought in prior to listing or at the head of the rush when it hit the boards. Not so good for those who bought in subsequently. I don’t trade IPO’s because there is no chart history and the promoters almost always ‘gild the lily’ to extract the maximum possible dollar out of the listing.

5 stockshave been removed from my Stock’s to Watch given their prices have pulled back in this choppy market or they have moved ahead and are too near to their target to be considered as having good short-term potential. Another 5 potential trades have been added - including 3 I have never traded previously but are certainly worth a look.

Weekly Blog 4 December 2020

While the XAO closed slightly higher (.7%) than the prior week, its high was lower than that previous week. While this could be seen as a sign of a general slowing ahead of a move back down to around 6,500 before another rally, as this week closed near its high, prices are more likely to resume moving higher week.

While I regard investing in IPO’s as akin to a night at the Crown Casino, a new listing by Nuix this week skyrocketed making its backers, Macquarie, a billion dollar profit. Investors buying on market have paid an amazing $9 for every $1 of the company’s earnings. Personally, I’d rather hold MQG shares (which I do) rather than punt the unknown. While short-term profits are nice, hard lessons over the years have taught me that the turtle always, always beats the hare in the long term.

My own portfolio this week moved up in line with the market with 70% ending higher and 30% lower. The best performers were BID (up 12.6%), M7T (7.0%) and WGN (17.0%). BID and WGN were both recent picks from my Stocks to Watch page. There were no major declines with COH being the largest, losing 3.3%.

From last week’s Stocks to Watch, apart from WGN there were no standout performers although AWC moved up 5.0% and QAN down by 4.5%. My comments on QAN suggest I see it as a difficult stock to trade and this last week might support that view. This week there are 3 new additions to my Stocks to Watch and three deletions. One of the new listings is A2M which has been a favourite of many that fell on hard times with Covid, losing 35% of its value.

I have been paper trading a portfolio of 10 shares on a long-term basis for my share charting students using the trading techniques I suggest in my material. That portfolio, which targets modest but secure returns with protection of capital paramount, has returned 3.1% since commenced 3 weeks ago.

One stock to watch (for the wrong reasons) is sometimes market darling Z1P. I don’t trade BNPL stocks because I think they have financial and regulatory risk issues but Z1P is interesting to me as a chartist because it has made a text book Head & Shoulder pattern which suggests a strong fall in prices could be ahead. While last weeks new lower low completed that pattern, having done so by only $0.02 is possible prices could recover. However, Z1P is not looking good at this time.

Z1P 4Dec20

Weekly Blog 27 November 2020

A mixed week on the XAO saw price rise strongly at the start of the week only to give back half those gains by Friday’s close – but still up 1.1% for the week. Fridays low was 6,800 - a previous important level and one that may give some support. That said, it wouldn’t be unusual to see lower prices for a week or two after such a strong rally as seen over the past couple of weeks.

My own portfolio experienced a 1.1% fall for the week. The principal gainers were MSB (11.8%) and MVP (10.2%). There were no stand out losers with the biggest fall being PME (-6.8%).

This week I topped up my holding in STO and bought back into WGN which I had traded profitably recently and identified as a stock to watch last week. I also sold 50% of my EOS holdings to protect profit (it looked like price might drift back to an underlying trendline support - where I could buy back).

Banks and financials in general seem to have caught investors imagination with the CBA, for example, being up 17% for the month to date. The last 3 days of this week saw a reversal candle (a doji) followed by two consecutive falls. CBA’s price has been in a rising price channel which (if correctly interpreted) sees price bouncing down off that channels’ upper boundary. Price could now drift back down towards the lower boundary as it did in August/September, or it could retest the upper boundary and even break higher to my original price target of $85.88. My feeling is that price has run so strongly a retracement is the more likely option before a final push higher.

 My Stocks to Watch page has proved problematic this week as so many stocks continue to exhibit strong growth and tradeable patterns, to the extent any uneducated buy would have had a good chance of making a profit over recent weeks. All good things come to an end and when they do the uneducated investors often get burnt because they don’t know when to hold or fold. Anyway, I have tried to pick just a handful of the strongest trades for inclusion in Stocks to Watch. Interestingly they include the Covid impacted stocks of QAN and FLT. CBA and EOS were removed because they have retraced a little and future short-term direction is less certain, however, they remain potential long-term holds. The Stocks to Watch page attempts to only identify short term trades – those with an immediate potential of a lift in price. A portfolio of long-term trades is managed and analysed on a weekly basis for the educational support of sharecharting.com.au students.

Last week I mentioned a gold explorer CHN as having a strong chart and that I had opened a trade. Despite most gold stocks tumbling in line with the fall in price of physical gold, CHN rose 5.2% for the week. This could auger well for CHN when Gold recovers – as it always seems to. However, considering the following paragraph CHN may be swimming upstream.

While I was scanning the ASX this weekend NST’s chart caught my eye. The chart (see below) has a really obvious long-term line of support (the blue line below price) that has been respected like a brick wall for several years. Conclusion - price will probably fall 8% to 10% to again reach that support before turning up. It doesn't have to, but it has a high probability of doing so and suggests to me that gold stocks in general could have a bit more pain ahead and now might not the time to buy.

One final thought on the GOLD chart. Price may be making a price channel (a flag pattern) being the shaded rectangle on the chart. If price does move up from the lower flag boundary and confirm the pattern that could be positive for gold in the long term as prices usually break up out of flag patterns in an uptrend to see materially higher prices. With price at an alltime high I'd also be a bit cautious about that prediction as prices can often form protracted sideways patterns at the top of price action before a major downhill slide. Given GOLD's historical and seemingly never ending uptrend - I'm favouring the higher prices alternative.

Gold 27Nov20

NST 28Nov20

Weekly Blog 20 November 2020

Despite the market sprinting higher in the prior week, the XAO still managed to put on just shy of 2% this week and at 6,740 is only 56 points from 6,796 – a number I’ve been suggesting for several weeks as a likely target. It may reach 7,200 towards the end of this year but as always, the market may have other ideas and it does not pay to look too far ahead.

My own portfolio only saw a 0.3% rise. The principal gainers were MSB (12%), M7T (8.0%), BPT (8.0%) and EOS (7.9%). There was only one major loser in MVP (down 6.1%).

Two weeks ago I started a theoretical portfolio (paper trading) of 10 large cap stocks for potential long-term trades for my students so they can get a feel for how I deal with these stocks over the coming weeks and months as price unfolds. That portfolio is up 2.5% so it is off to a good start, albeit with a much more sedate group of stocks than I usually trade.

This week I topped up holdings in BPT and SGM and entered a new trade in CHN. I also sold SGM at its predicted target.

My Stocks to Watch page has had WGN returned after a couple of weeks absence. It also sees AWC, CHN and TRS being added. The stocks on that list last week rose approximately 2.5% on average – ABC fell by 5% but CBA, EOS and WOR were all up by 8% - 9%.

All the banks have similar looking charts and at the moment they are all looking like they are going higher. I haven’t commented on them all but you can find WBC and CBA on my Stocks to Watch page.

Gold mining shares have always been popular with investors but I rarely trade them as they are often quite volatile and their charts can be challenging to interpret. It is best to trade gold stocks when the price of physical gold is on the rise (so the rising price of gold supports rather than restrains potential rises in share prices. The chart below shows that Gold made a technical downtrend from March to June this year and since that time it has not moved into a technical uptrend – so by definition it remains in a downtrend. Gold has not made a higher low followed by a higher peak on the weekly chart since late July and is now down 10% from its most recent high in August. While gold mining/exploration shares travel to their own rhythm, they are influenced by the price of physical gold, and now might not be the best time to buy them. I had second thoughts about buying CHN this week, but the strength of its chart eventually won out – although my trade was a little less than my usual buy in.

Gold 20Dec20

Weekly Blog 13 November 2020

The Biden/vaccine led share market rally continued this week to see the XAO up 3.4% and inching closer to my target of 6,800.

With a number of my trades climbing this week my portfolio saw an overall increase in value of  10.0% - something I don’t ever remember achieving previously. Several trades hit or neared targets and were sold – SVY, LOV, FBU, PLS and WTC. Shares purchased included SGM, MQG, GEM, BKL and BPT plus top ups in MVP, COH and PAR.

Best performers were M7T (20.2%), SGM (11.5%), MVP (12%), FBU (22.1%), WTC 12.1%, LOV (11.8%) and SVY (11.7%). The worst performer was FPH (-5.7%)

With many stocks moving up in this bullish week a number of my Stocks to Watch have run their race, had their pockets emptied and removed from that list. There have only a few new additions to the Stocks to Watch page, including CBA. I’m not a fan of trading banks but CBA looks good if it can get above $76.

Contact

Robert Norman

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

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