Weekly Blog - 29 October 2021

Last week I commented on how the XAO was stuck at 7725 and we needed to see a confident break above that level for a sustained (but probably short) rally to be likely. I also said the candles were suggesting a possible pullback this week. While Monday and Tuesday saw slightly higher prices, Thursday and especially Friday (it’s always Friday, isn’t it?) saw a steep reversal and the XAO closed down 1.1% for the week.

The bearish candle on Friday suggests further falls next week. However,  Friday was the day before an extended break for many in Melbourne thanks to a horse race – something which probably saw a rise in the number of trades being closed out to avoid being caught by surprises over said break. Should any day close below 7,480 next week it could be a sign further falls are coming and it would suggest to me the XAO is eying off 7,160 – which is the next level of support, and very close to a 10% correction from the August high.

The week before last my personal trading underperformed the market, bus as is usually the case, this was just a matter of timing and I closed up 2% overall. After IFM gave my trading a black eye last week I’m still holding as it is yet to close below the prior low on the weekly chart. Price is near the underlying long term support line of a large price channel and I’m still hopeful IFM may recover (but less hopeful than I was).

My best performers were NMT (rose 19.7%), TRS (up 8.3%) and LYC 7.2%

Given that I sense ‘clouds on the horizon’ it has been hard to get excited about any stocks this week, but one that caught my eye was ORI. This stock has been in a general long-term decline for 2 years, but broke above that downtrend 4 weeks ago (a buy signal). It is also coming off a significant low and making higher weekly troughs and peaks. The stock also made a double low at $11 with the prior low back in 2009. The double low predicts strong price rises ahead (usually around 100% gain – a rise of another $11 – now that would be nice). Accordingly, ORI has been added to my Stocks to Watch this week.

Last week’s Stocks to Watch had a mixed performance to overall break even. TRS did spike 8% and being very close to my target of $7.10, has been removed from this week’s list – although I continue to hold in the expectations of it continuing to track higher. BOQ has also been removed as it fell back 3.3% this week, significantly more than other banks lost. That fall also voided the pattern I thought price had been making and it now looks like it could be a simple rising price channel where Friday’s fall took price to the lower boundary of said channel. From that point it should/could rise but it’s outlook is now less certain for me. Again, I will continue to hold in the expectation the channel boundary will cause BOQ to bounce up.

The markets fear of economic ramifications from Covid appear to have lessened with Australia relaxing its lockdown restrictions. However, with the spectre of China invading Taiwan becoming more tangible, and China’s property market potential meltdown, focus has turned to these new concerns. Bond rates are rising and assuming that continues, the expectation would be for company profits and hence share prices to be constrained to some extent. Rate rises are a particular concern for Australia because of our very high levels of residential mortgage debt, much of which has been taken on by borrowers expecting rates of 2% to remain in force for ever (and forever has just arrived I suspect). At these record low levels a modest increase of 2% effectively means a doubling of loan repayments and very high levels of mortgage stress that could further impact our economic outlook.

On a more positive note, the market might see Friday’s market as oversell, bringing the bargain hunters out.

All the best, watch your stop losses and trade conservatively.

Weekly Blog - 22 October 2021

Last week I said a break above 7,725 might signify higher prices but the week’s short rally ran out of puff right at that level with the last 3 days closing within a point of each other around 7,727. The last 2 day’s candles were doji’s which signify market indecision and are often precursors to a change in trend – so next week could see prices fall back again. Price momentum is tracking nicely along the solid black line I put on the chart a few weeks ago as an indication of where I thought price could head because it has risen with the same angle (momentum) on 3 recent occasions. If history repeats it suggests the probability prices might keep running higher along that line to around 8,300. With that in mind (and doji aside) it could just be a case of price  consolidating at the 7,725 resistance before another push higher. We need to see a confident break above resistance to support that argument.

XAO 22Oct21

The XAO rose 0.8% and my own holdings were tracking along that path as well with most trades moving up, but my overall performance (and let’s face it, that’s all that counts) took a hit because the CEO of IFM stepped down and price fell 15% as a result. IFM has recovered about 3% from its lows and for now I’ll hold to see where it goes. LYC also took a hit on Friday, falling 8% on a performance release (but only losing 1.6% for the week).  I wouldn’t be surprised if LYC fell to around $6.25 before again rallying. Price is at support so my (optimistic) outlook is that price will recover next week (LYC can be a little volatile) and break above $7.80.

The only other significant moves in my portfolio this week were ADO (up 8.7%) and NMT (down 8.0%).

My educational trading portfolio was up 1.1% for the week and 20% for the last 11 months.

Financial and consumer discretionary sectors were big drivers of the market moving up this week, while energy and resources dragging it down.

My Stocks to Watch had a few bright lights with TRS, REA and AIA all up over 4% and no significant falls amongst the other picks. CIM, BFG and SGM all show positive signs of rises in the short term and the latter two have been included in this week’s Stocks to Watch (CIM missed the cut because last week’s candle suggests more sideways action is possible before it moves up). While CIM and BFG may take a while to play out, SGM is more of a trading stock where a short/medium term gain of 35% is possible if price moves back to the upper boundary of its price channel as it has previously.

I’ll give TLS, which I removed from Stocks to Watch last week, a mentioned – simply because I was looking at it today. It continued to show signs of weakness and closed for 2 consecutive weeks below its uptrend to make a strong sell signal. On the positive side price has fallen to support which is also the lower boundary of a price channel. I’m banking (literally, being a holder) that price will reverse next week to make another try at the $4.00 level which has proved to be an impenetrable barrier for more than 4 years.

Happy trading.

Weekly Blog - 15 October 2021

While the past 2 weeks have seen a 2.4% improvement in the XAO, price is just below significant overhead resistance which could see price fall – potentially around 2.2% to 7200 (or lower if it breaks 7150). Interestingly, this weeks high was right on the upper boundary of the large shaded price channel on my chart. The price is also right on a possible new downtrend that may be forming (the red dashed line). Price has held below this possible downtrend for 9 weeks. Put another way – price is currently at the confluence of two overhead resistance levels and I have to think price will again fall next week. The short solid black line marks the trajectory of where price could go if it manages to break higher. A break above these resistance levels would be a strong signal that prices could rally back towards 8,200 (but possibly wishful thinking on my part given the strong headwinds).

XAO 15Oct2021

My own trading has seen gains in line with the XAO. NMT (up 14.6%) was my best performer with ABR coming in second at 11.1%. LYC also put on 6.8%. During the week I bought into and then subsequently topped up one of my old favourites, SGM, which ended the week up 9.9% - not that I saw all of that. The rest of my trades fell back, but not by large amounts. I sold SXY for a profit during the week – seemingly at the right time as it has pulled back a bit since then.

Last weeks Stocks to Watch mainly fell a little with SLR being the stand out performer, being up 10.3%. This week I have removed TLS as it seems to be rolling over and may fall further before rising. I’ve added OZL and NCM.

Fingers crossed for another good outcome next week.

Weekly Blog - 8 October 2021

The roller coaster ride continued this week with the market alternatively rising and falling back to lose those gains, but ultimately closing higher for the week – the first positive week for 5 weeks.

Where to from here is anyone’s guess. This weeks candle closed on its high (up 1.75%) suggesting further rises next week. However, the US closed flat on Friday and without any guidance from Big Brother our market is likely to be directionless on Monday in the absence of any other catalyst. The line in the sand for the XAO is 7466 and should price fall and close below that, we are probably going to see further falls to the next support level. On the other hand, if the XAO can get above 7720 it will make a higher high and might just be encouraged to go a bit further. 7900 is the previous high and I’d be surprised to see price break above that. A continued sideways shuffle until the first week in November is another likely option and were that to happen, the chances of a short rally around the start of the month is plausible. However, until we get a reasonable correction behind us, the chances of a sustained rally are constrained.

Gold is seeing a resurgence but it remains to see if that can be maintained.

Gold sector 8Oct21

This chart of the gold sector index shows that last week price broke above a downtrend that has been in force for some 6 months. A higher close this week would reinforce the view gold prices are in recovery mode. The sector made a head and shoulder pattern early this year which predicted prices falling to 5947 and the lowest close 2 weeks ago was only 1.5% off that prediction. Should the index get a wriggle on and break above 7660 then that would suggest further rises ahead – but how far would depend on the price action leading up that level. Anyway, it is something for the gold desperates to hope for!

I’ve closed out a couple of small trades that broke stop losses earlier this week and haven’t seen many stocks that I’d be prepared to risk a punt on in this challenging market. That said I have added SLR (a gold stock) to my Stocks to Watch. Last weeks watchlist did quite well with SXY and JLG up over 6%. I’ve removed SXY this week as it is unlikely to rise much further in this rally. I’ve also dropped FPH after it fell 5.7% with week. It has retested a previous strong level of price support so it may recover but if I wasn’t already in FPH I wouldn’t be buying at the moment.

Good luck for another week.

Weekly Blog - 1 October 2021

The XAO closed 2.1% lower for the week after falling to my previously suggested support near 7480. It then recovered most of those losses to climb back to 7630 on Thursday -  only to give away all those gains to close back at support at 7457. I see 7480 probably holding and prices rallying for a few days next week, perhaps even breaking up out of the regime of lower peaks and troughs we have been seeing on the weekly chart. However, that could just be wishful thinking on my part as Friday’s candle was a strong bearish candle, although it didn’t close on its low. In short, there are charting arguments for both rises and falls from Friday’s close.

I was struck by the strength of BPT’s chart last week and bought in to get a slice of its 19% gain for the week. It has fallen back a little on Friday, but I’m continuing to hold for now.

BPT was one of several stocks I identified last week as potential trades based on a break above downtrend. Despite the general market pullback, most of those stocks finished in positive territory for the week (see the table below) -.

DT break Sept24

My trades in LYC, NMT and MP1 were all down between 6% and 9% for the week and my overall result was in line with the XAO. LYC and NMT have both fallen back to trend from where they should move up again, (unless the XAO fails to hold at 7480). MP1 has broken below trend while making a sideways pattern in a tight range for 10 weeks. This type of sideways consolidation pattern usually (but not always) breaks higher and for now I’ll see how this plays out – despite the break below trend. A break below that pattern would see the trade needing to be closed out.

My theoretical medium term trading portfolio has seen 4 of its 10 stocks break trend and sold, but it is still up 16.5% for 10 months and despite those sales (which are made based on a strict trading plan) the portfolio only fell 1% last week.

My Stocks to Watch are really just a theoretical exercise in this market, but XRO and WES have been removed as their price moved back. I’ve added SXY which has broken above resistance.

Good luck for the coming week.

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.

Contact

Robert Norman

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

Sorry, this website uses features that your browser doesn’t support. Upgrade to a newer version of Firefox, Chrome, Safari, or Edge and you’ll be all set.