Weekly Blog - 17 December 2021

Wile the XAO fell again this week its general trajectory over the past 3 weeks is up. There is overhead resistance around 7,750 and price got very close to that last week before falling back. It’s hard to say whether price will recover and break higher (hopefully through that resistance), or fall back to the 7,500 level again. In short, the market continues to tread water with concerns over COVID and inflation a drag on investor confidence.

My Stocks to Watch last week generally moved up with FMG, ILU and PLS all gaining 5% or better. I’ve removed FMG this week. While still rising it has reached my target and I’d expect it could fall back. I sold my own holding Friday to crystallise profits. I’ve added RED and TLX as both are at or above resistance and could be expected to go higher (RED has a potential 15% gain to my target and TLX 10%-15%). TLX shot up the week before last and fell back a little this week as might be expected.

My own trading was up on the market again this week – well it would have been, was it not for CSL falling back 8% after funding one of the largest takeover offers the world has seen ($6B) by a discounted share issue. I’m expecting they will bounce back but it could be a long time before they get back to pre-fall prices.

As a trader there is little in this market to get excited about and the conservative amongst us need to just keep putting one foot (trade) in front of another while closely managing open trades.

Weekly Blog - 10 December 2021

Despite the media trumpeting ‘best trading in months’ after a couple of big daily rises, we shouldn’t lose sight of the fact the XAO is below where it was 2 weeks ago and until price confidently closes above 7800 we haven’t shaken of the current 4 month downtrend.

My feeling remains that the XAO will break above 7800 but with the market nervous about inflation, COVID and China, nothing is certain.

Most sectors ended in positive territory this week with gold up a whopping 3.5% and consumer discretionary not far behind at 2.5%. However, tech could only manage 0.03% - so how well you did depended on how your portfolio was weighted.

I’ve done very little trading over the past few weeks, preferring to manage my existing trades and minimise risk in these 'interesting' times. This week my best performers were FMG and EVN – both up close to 6%. I did see one trade I couldn’t walk away from last Thursday when TXL spiked. I bought in on Friday and ended up 3% to the good – although the stock rose a staggering 24% this week. I believe it may go another 10% based on my analysis.

The XAO rose 1.65% for the week and while my own trading was close to 3.5% to the good – in part that would be compensation for last week when I fell short of the market.

In my Stocks to Watch this week I removed NMT after it fell 10.7% for the week and have included ILU which could have a 20% gain ahead of it if it moves back to the top of a price channel it has been in for the past 12 months.

(Note: I seemed to have suffered a technical glitch with my Stocks to Watch last week as it did not seem to have updated from the prior week. My apologies if this confused anyone.)

Weekly Blog - 10 December 2021

Despite the media trumpeting ‘best trading in months’ after a couple of big daily rises, we shouldn’t lose sight of the fact the XAO is below where it was 2 weeks ago and until price confidently closes above 7800 we haven’t shaken of the current 4 month downtrend.

My feeling remains that the XAO will break above 7800 but with the market nervous about inflation, COVID and China, nothing is certain.

Most sectors ended in positive territory this week with gold up a whopping 3.5% and consumer discretionary not far behind at 2.5%. However, tech could only manage 0.03% - so how well you did depended on how your portfolio was weighted.

I’ve done very little trading over the past few weeks, preferring to manage my existing trades and minimise risk in these 'interesting' times. This week my best performers were FMG and EVN – both up close to 6%. I did see one trade I couldn’t walk away from last Thursday when TXL spiked. I bought in on Friday and ended up 3% to the good – although the stock rose a staggering 24% this week. I believe it may go another 10% based on my analysis.

The XAO rose 1.65% for the week and while my own trading was close to 3.5% to the good – in part that would be compensation for last week when I fell short of the market.

In my Stocks to Watch this week I removed NMT after it fell 10.7% for the week and have included ILU which could have a 20% gain ahead of it if it moves back to the top of a price channel it has been in for the past 12 months. My picks from last week did very well (apart from NMT) with 6 of the 10 stocks rising by about 3.5% on average.

(Note: I seemed to have suffered a technical glitch with my Stocks to Watch last week as it did not seem to have updated from the prior week. My apologies if this confused anyone.)

Weekly Blog - 3 December 2021

The XAO fell 0.7% this week and after 4 straight weeks of falls it is back to where it was 6 months ago. 7,500 has proved a strong level of support and after falling to that level last Monday, prices have bounced along sideways. If price follows its recent dance card it should move back up to around 7,800 in the leadup to the Xmas break. Should it break lower and close confidently below 7,500 – expect even lower prices to follow.

The XAO has made several price channels within price channels and while it is difficult to untangle what these channels suggest about where price might go, I can see an argument that says price has fallen to the bottom boundary of a channel that goes back to the Covid tumble in March 2020. Theory suggests that price ‘could’ now move up to break out of its recent trading range towards the top boundary of that channel around 8,300 – 8,500. On the chart below the black diagonal lines mark the momentum of previous short rallies and the most recent of those lines suggests where a new rally might head, were it to start now.

XAO 3Dec21

One the negative side, the XAO has been in a general shalllow downtrend since August – although importantly not a formal downtrend (were prices to now fall below 7,445 a formal downtrend would be confirmed). Charting theory says that when prices are in a downtrend, expect them to continue falling – although obviously they can’t do so forever.

Prices have risen during December and January for 5 out of the past 6 years – so let’s hope history repeats.

As for next week, while the US market was sharply down again on Friday it rallied in the latter part of the session which might carry prices higher on Monday. Our futures for Monday suggest a rise of 11 points although I’m not expecting much optimism from the market until a prognosis regarding the impact of the Omicron COVID variant is known. Let’s hope it is, as some suggest, simply mutating towards becoming a no greater threat than the common cold (which is thought to have originated from a bird flu that jumped the species barrier 200 years ago).

I’ve been feeling my Stocks to Watch has ‘lost its way’. I originally intended this to be a list of stocks that had charting patterns that suggested an increase in price was probable. As chart patterns may take a short time to be proved right or wrong (prices may even fall before moving up) I have been leaving stocks listed until they prove the analysis correct or otherwise. I’ve decided to revert to the original concept – only list a maximum of 10 stocks whose chart suggests prices may move up.

I also have not updated Stocks to Watch for a couple of weeks as I’ve been taking some time off and the market has been falling back, possibly even rolling over into a correction -  making chart predictions less reliable.

Seven of my previously listed stocks have fallen back or gone nowhere and while my review suggests they still may live up to their promise, in terms of my revised rules I have removed them.

I have added NUF, ORE, HUB, NMT, PLS, ARB and TLS with associated analysis to be found in my Stock Commentary – or just click the stock’s code here.

Weekly Blog - 26 November 2021

The XAO had a big fall on Friday and closed below a level of support – suggesting a continued fall to 7,470 (or beyond is potentially possible). With the index making lower weekly troughs and peaks it all feels a bit ominous.

Neither the larger market or many of the underlying stocks give me much confidence of next week being positive. However, perhaps bargain hunters will see the market as cheap and push prices up. I gather the US market was closed Thursday and the absence of their buyers has been suggested as one reason for the selling frenzy here today. The other elephant in the room is the escalating Covid infections in Europe and a new radically different Covid variant in South Africa (also detected in Japan I think I read). And you thought lockdowns were over..........

Given the uncertainty in the market I am not revising my Stocks to Watch this week.

There’s little a trader can do except manage his open trades and pay a close watch to stop losses. 

Weekly Blog - 19 November 2021

Having been away from my desk for a week or so I haven’t had time to update my XAO analysis or look at Stocks to Watch.

From my last listed Stocks to Watch I’ve deleted:

SLR: Price has risen 50% since it started its current run up. Nothing lasts forever and while it may go higher, it needs a breather – and as such a buy now would come with reasonable risk.

JLG: Price has reached the top of its probable range and a buy would come with some risk.

Potential additions are many and a brief summary follows. As I like to keep Stocks to Watch to a limit of 10, I could only pick 3 of the stocks listed below. Once I include a stock I leave it listed until it suggests it may not perform as planned – to allow for the fact that sometimes patterns take several weeks to play out. I’ve chosen to include EVN (gold seems to be on a roll), IFM (coming of a significant low means higher potential gain) and FMG (broken a very significant reversal and Twiggy always seems to kick a goal when he’s down).

EVN, FMG & ORI: Have all broken downtrends recently and coming off significant lows. Many mining stocks seem to be having something of a resurgence. Gold has broken above a long term downtrend suggesting gold stocks in particular probably have good potential.

ECX has been range bound in a rising price channel for 18 months and being at the bottom of said channel there is every likelihood price will bounce up to the top channel and an 18% gain for those agile enough to get in and out quickly.

CGF could jump up to break resistance at $7.22 and if so could make a target of $9.70

ASM: As a relatively new listing, ASM is not my usual ‘cup of tea’ but could break above $14.00 for a target of $18.80

TLS: Seems set to continue its run higher and after struggling to get above resistance at $4.00 it seems to have made that break to suggest a target of $4.23 – but the potential profit from current price may be a bit thin to justify a buy.

IFM: One for the thrill seekers. After a big drop due to the CEO moving on, price has started a significant recovery. Assuming prices return to their previous levels there is a 20% potential gain. A possible price channel supports this view.

BFG: Broken out of a long term falling flag pattern several weeks ago and has risen strongly since. With price currently around $1.85 the pattern suggests price should recover above $2.00 - and a break above $2.00 would suggest a target of $2.40

ARB: Has been rising strongly and a break above $54 suggests a target of $62.

i'll try to update my detailed analysis on the above stocks as time permits.

XAO

The XAO pulled back 0.5% in a lack-lustre week just gone. My own portfolio closed exactly where it started the week - and I'm calling that a win given the fall by the larger market. My educational trading portfolio fell heavily by 1.4%, being its first reversal for some time. That portfolio remains up 24% for the past 12 months.

The XAO is still in the control of several price channels. One large channel that has contained price movements for 13 years.

XAO 19Novbig picturePrice is currently at the top of that range and could struggle to make any material or lasting breakout. A correction to 7460 or 7170 remains a high probability. Since the Covid fall of March 2020 price has formed a smaller rising price channel and while subject to the overarching constraints of the larger price channel, it is possible, were price to break above 7840, make a short run up to 8200. Achieving 8200 would see the correction potential rise to a point that the dam may burst and we fall back to 7500 or thereabouts (a fall of roughly 10%). That would still leave prices near the top of the larger channel, suggesting a bear market could still be needed to ‘reset’ the market. This is all pure conjecture and it needs to be remembered that price channels are just indicators. Look back at pre GFC times and you will see that prices rose more than 100% above the upper boundary of what seemed a good price channel at the time.

Finally, there is even a larger price channel that stretches back to the start of my data in 1982. The larger the channel the stronger its boundaries and this larger channel suggests a top of 8400 could be a ceiling.

A few weeks ago I posted that most recent rallies in the XAO have followed the same momentum (the black lines drawn on the chart).XAO 19Novsmall

I suggested that the current rally could follow that same momentum, but it has fallen a bit short with momentum being lower. This is possibly another sign on the market slowing down and starting to ‘roll over’.

There are a few competing views here, but in summary my expectation is still for the market to move up to around 8200 or even a little more and then correct. This is not a time to take risks and I have materially derisked my own portfolio. Stick to your winners but jump out of trades when they clearly break stop losses. Good luck.

Weekly Blog - 12 November 2021

The XAO fell by 0.15% for the week but there were some good gains to be had amongst the mining stocks. I currently hold PDN (up 12.8% this week), LYC (up 10.3%) and SLR (up 9.4%). SGM was also up 5.9% and none of my other trades fell materially. My trades were up 1.9% for the week. My long-term educational portfolio was up 2.3%

The XAO fell all week apart from Friday to close basically where it started - being a level of resistance. I’d like to think it will break higher next week but it could just stage a rerun of this weeks mixed bag and end up going nowhere.

As I’m currently travelling, I haven’t had an opportunity to consider my Stocks to Watch and they remain unchanged again.

Weekly Blog - 5 November 2021

This week was a breath of fresh air after the ASX doing very little for weeks with my trades up 8.1% and my long-term educational portfolio by 7.0% - so compared with the XAO’s 1.8% gain, both portfolios did well.

My best performer was MP1 (up 10.0%), followed by ARB (9.0%) and JLG (6.0%). Five other trades improved by 4% or more.

However, I’m not sure it will continue as the XAO closed this week back at our old friend – 7780 resistance! I’d like to think it will break higher (something that should see prices push for 7,930), however, for all the reasons I mention regularly (such as the market being at the top of its range) it will be hard for the market to improve much from here. The way the patterns in the XAO have developed over the past few weeks there is overhead resistance at 7,830 which could also stop a run up in the event the all important 7,780 does get broken.

As I’m tied up on another project for the next 10 days there is no Stocks to Watch report this week. If I find time during the week I may update it.

Good luck next week.

Contact

Robert Norman

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

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