Weekly Blog 4 June 2021

As for last week, whether you made or lost money this week will have depended on your exposure to various market sectors with the energy sector rising 8.5% while the gold sector fell 3.5%. As I both held no energy stocks and was a bit heavy in gold, needless to say my own results for the week were negative – down 3.0%. That said, the outlook for those laggards remains positive and, as is usually the case in trading, the market likes to test traders resolve, and almost always I find that backing my analysis ultimately proves to have been the right course of action.

Also sticking the knife in were WGN (down 12.4% for the week) and TRS (down 6.0%). WGN can be a little volatile and this week showed signs of price manipulation with price pushed up only to be dumped and fall before doing it all again. WGN’s price remains above trend and my analysis suggests it should recover and still make my target. TRS issued a profit downgrade due to Covid issues impacting retail buying patterns. It was down 15% from last weeks close at one point but recovered a sizeable chunk of those losses to (importantly) close back within the pattern it has been making. a weekly chart. The downtrend that has developed over the last couple of months could have been the result of some investors foreseeing the poorer trade performance. I’ll hold for now.

Gold has broken above the downtrend that has been in force for the past 6 months. It has also confirmed a new uptrend and is making higher troughs and peaks on the weekly chart – all of which are buy signals. Recently price has risen at a higher momentum than the trend line implies and as such some consolidation could be expected with price falling back to trend (a fall of about 3% - 4%).  See my gold sector analysis here.

My Stocks to Watch were in the main not worth watching last week with TMT and SLR both falling 13% for the week and DEG down 8%. EOS was the only stock to trigger a buy and that moved up 14%. All the picks from last week (even those that fell heavily) have the potential to recover and have been left in the listing. SXY has been removed because it rose 8.6% this week and is now too close to its upper price channel boundary to be worth considering an entry - but see my energy sector analysis which also references SXY.

WPL, PLS, STO all presented charts worthy of inclusion in my Stocks to Watch this week. WTC was another contender, but some nagging concerns worry me re its otherwise promising outlook.

I thought it might be interesting to look at the energy and gold sector indexes to see what they told me and compare some of the players in those sectors with the index. Have a look at ENERGY and GOLD in Stocks to Watch.

Weekly Blog - 28 May 2021

The XAO jumped 2.2% this week and having closed at its highs (and a new all-time high by a bee’s whisker) in the absence of negative news (such as Covid out of control in Victoria), I’d expect it to go higher next week. For several months I’ve expected a top in the region of 7500 and if price doesn’t fall back at the start of next week, chart patterns suggest a target of 7682 for the XAO. However, price is at the top of its range for the current price cycle and growing pressure for a correction might see a shortfall in that target. 

While the gains this week were spread across the market sectors, consumer discretionary, IT and financials were the stand-out sectors to be in, with rises of around 3%.

My student long-term trading portfolio increased by 2.5%, slightly better than the general market. My own, more speculative portfolio was up 0.8%, held back by low exposure to the sectors that performed best and not aided by FPH which reported an 82% profit increase and fell by 12% for the week. Apparently, investors were unimpressed because the company failed to provide guidance for the coming year’s performance. I’ve held this trade as it is a strong company with a great track record that should recover those losses. I’d like to think it can claw its way back to $30 over the next 3 or 4 weeks, perhaps retesting say $28 before resuming its climb. Falls like this are usually followed by what is called an automatic reaction or bounce (although price fell a little more on Friday).

My best performers for the week were CKF (up 9.5%) and WGN (up 8.7%) and the only large fall was FPH as noted above. I sold CKF for an overall gain of 15% as it had reached my target. I also bought back into CUV, SLR, SGM

My Stocks to Watch from last week all moved up except for EOS which fell 2.5% and ABC which was unchanged. Both retain potential to rise and have been left as Stocks to Watch. I’ve added VUL and ECX as both show short-term potential (possibly long-term in the case of ECX).

Weekly Blog - 21 May 2021

The market remains in limbo with an 0.4% rise this week. It is conceivable prices could fall further next week to around 7125 but from there (or current levels) I’d like to think price could rise back to 7,500 (which remains my theoretical market top). As noted previously, this remains a time to be cautious and conservative.

My student portfolio and my own trading mirrored the XAO gaining 0.4% and 0.5% respectively.

This week I topped up holdings in ENV, NCM and WGN and sold the last of my small holdings in FLT and OSH as lost causes.

EVN was the best performer for (up 5.8%). While 3 out of 4 of my trades rose for the week SGM fell by 5.4% and MVP by 8.1%. SGM fell back to trend and I expect that to rise next week. MVP is more of a worry but it has fallen back to a support level that has held since 2014 – so again, a good chance of turning up.

While picking stocks likely to rise based on charting is less successful in a falling or sideways market, 4 of my 6 Stocks to Watch rose last week and the overall average rise of the 6 stocks was 2.5%

Gold moved up strongly last week (2.4%) making it the longest and most consistent rally in the precious metal since June to August last year. Gold is still 20% above a line of support the price has held above for nearly 20 years. It is likely price will at some stage fall back to that support so there is always the chance this rally could evaporate. Price closed at an overhead resistance level on Friday and next week will determine if that resistance turns price down as it has before or (hopefully) the rally has sufficient momentum to break higher. See my chart here.

While numerous stocks are making positive patterns with the overall market in a state of anxiety/indecision this negativity often means that patterns don’t realise their potential – it’s a bit like swimming upstream! That said 3 out of 4 of my Stocks to Watch last week made good gains (2.5% overall average for the week). This week I’ve added SPL, EOS and DEG. While not blue chip stocks their charts all show potential and with the exception of DEG are all coming off lows. CUV and PNV were also strong contenders for listing and anyone with an interet in STO and/or WPL should check my updated comments on my Stock Commentary page.

Weekly Blog 14 May 2021

With the XAO falling 1.2% most traders will have ended the week in the red with some major crashes along the way. Anyone holding A2M shares will be wishing they didn’t after their fall of 21%. BNPL shares also tumbled close to 7% and could have more to go.

The XAO isn’t moving in an alarming way, just as one might expect after reaching record highs. This week it closed lower than it has for 5 weeks, suggesting weakness but Friday saw some recovery and we’ll just need to see where next week goes.

My own trading has mirrored the market – down 1.6%.

I sold EMV and SGM to lock in profits and topped up EVN, NCM and bought into SLR as it looks as if gold might be going to continue moving up. SLR fell a little while EVN and NCM rose, but there were no notable moves amongst any of my holdings.

With concerns about inflation and the resultant rise in interest rates on the minds of investors there is little to suggest (other than a strong finish to the week by the US market) that next week won’t see another lacklustre performance.

Picking candidates for my Stocks to Watch page has been a challenge in this market with 50% of those listed last week having fizzled out and retraced. Only EMV achieved (almost) its target before falling heavily. XRO fell 16% on concerns about tech stocks and an underwhelming outlook statement.

One concern for me is that reviewing a large number of stocks as I do most weekends, those developing a bearish outlook far outweigh those with a promising future. Also, I couldn’t find any new stock that I thought showed great promise – and that doesn’t augur well for the market. There will be stocks that rise, of course, but predicting those from the charts is less certain.

I have been watching two stocks SXY and TMT and both are high risk plays, although TMT less so (assuming it breaks up out of the pattern as outlined in my analysis). Given nothing else caught my eye, I’ve included these two stocks in my Stocks to Watch page.

Weekly Blog 7 May 2021

The XAO is showing no preference for a material move up or down, but is continuing to achieve slightly higher highs this week in line with the upper boundary of a large price channel. With so many different influences working on the market, it is a 50/50 bet whether prices will rally and break higher or correct and fall in the short term. A continuation of the sideways creep until something pushes the market one way or the other is perhaps the most likely short term outlook.

My student long-term trade portfolio gained 2.2% this week and after 6 months is up 15.8% (31.6% on an annualised basis).

My own trades fell a little because of holdings in travel stocks FLT, WEB and SYD. I closed out some of these this week (WEB broke a stop loss for me) and of course both WEB and FLT rose significantly on Friday. I still hold 50% of my prior FLT trade because the chart suggests it is at support (and hence the Friday rise). I have moved my portfolio to more than 50% cash and while prepared to trade strong patterns, they are proving harder to see, with many stocks presenting bearish patterns.

Of my Stocks to Watch last week 4 rose and 4 fell with SLR up 8.6% and XRO has been removed after falling 5.5% (probably in response to the tech sector getting a bit of a hiding at the moment). XRO may rise back to break the overhead resistance that formed the basis of me including it on my report previously. Such an event, should it break above resistance, would reinforce my earlier target. FPH fell 7.0% but it is at a support level that may see it recover next week.

I’ve added NCM back to my list. It rose 3% this week and if that continues to see a close above resistance around $28.00 price should head up towards $30.00 where there is further resistance. As NCM’s fortunes are closely tied to those of gold it is often unpredictable. Gold seems to be breaking out of its downtrend moving above a weekly downtrend line. Another 3 weeks of higher prices will confirm a new uptrend and perhaps a spike in the value of other gold stocks. and perhaps a spike in the value of other gold stocks.

Weekly Blog 30 April 2021

Very little to say this week with the market suggesting investors are undecided which way price will go from here. Last week the XAO made an equal high with the previous week (there was a difference of $0.60 in the two highs, but in $7,358 I’d call them the same). Price could still be trying to break above the resistance of that level, but with the US losing ground Friday night I’d say our market will be fairly unimpressive Monday.

The XAO closed 0.4% down which was in line with my own trades and the long-term trading portfolio I run for people who have bought my educational material.

The Gold sector lost 6% for the week and many of the other sectors also finished in the red. One notable exception was Financials which rose 0.3% for the week.

With my own trades the only stand-out performers were EMV (up 8.0%), WGN (up 11.2%). FLT lost 6.8% on more negative quarantine news.

Stocks to Watch has had DOW included as it is the only stock amongst those I watch suggesting it could rise up to 18% from its Friday close (providing it can break above about $5.85). MYX has been removed after it fell back strongly, as has TRS and NCM. RWC and SGM both rose very close to their targets and fulfilled their analysis (SGM actually met its target in the prior week). As we’ve seen it is quite difficult for stocks to achieve technical targets when the market decides to move sideways as it has the last 2 weeks. I still believe most of the stocks I’ve removed from my list still have potential, but the probability of achieving said potential has reduced. Nearly all my Stocks to Watch are noted as needing to close above certain levels to be likely to achieve stated targets and many of those removed stocks have not done so and as such the targets are not confirmed (so, as they say, ‘off with their heads’).

Weekly Blog 23 April 2021

This week’s high for the XAO was 7358 and anyone who has some of my recent charts of the XAO will see I had expected a high around 7362 – so chalk one up for charting. This week’s candle was a doji which suggests market indecision and as such is a reversal candle – it suggests prices could fall back next week.

We are now officially (in my book anyway) at a market top which is a time to be very conservative and not back any losing trades because ‘they will probably recover’ –they just might not. Price could possibly go a little higher next week because it is still below the price channel upper boundary, but several things can happen from here. In very general terms I’m expecting price to fall back to around 7200 and then push up towards 7500. If there is a pullback it could, however, fall to around 6725 which, at 8% off this week’s high, is close to a technical correction. A fall to around 6200 (16%) is also on the cards if the market panics (which is usually what happens sooner or later at market tops).

Despite the market fall, my hypothetical long-term portfolio I have been running since last November inched a little higher (up 0.3%) and my own personal trades were up 1.0%. There were no standout trades except for RWC which rose 8.1% for the week and DEG which I bought on Thursday and sold Friday. DEG rose 20% on Friday but I missed a slice of that as I sold well before the peak because I had other matters to attend to that prevented me from watching the market Friday afternoon and it was a stock I didn’t want to hold while I’m off grid next week. My only other trade for the week was to sell 50% of my OSH holding as it seems to just keep losing ground and had triggered a minor stop loss.

PLS and MYX have both been deleted from my Stocks to Watch this week after both fell 12%. The steep fall has put a hole in their probability of short term rises but both stocks have fallen back to trend, not below it and both show tentative signs of moving up from that support.

Weekly Blog 16 April 2021

With the market making a steady 1.0% gain for the week, all was once again well with the world. Patterns are again moving price up as charting theory suggests - something that didn’t reliably happen in the sideways market previously in force since the start of the year. For example, my Stocks to Watch picks have not lived up to expectation for several weeks now, but this week they rose 3.3% on average, with MYX up 20%.

With my Stocks to Watch page there were a number of new contenders for listing (BKL, EMV, MVP, WPL) who all exhibited strong patterns suggesting short term growth. None of my existing listings warranted removal and, wanting to keep the list to a manageable size, I included only EMV and MVP – but readers might want to have a look at BKL and WPL.

My own trades moved up 1.5%. I sold SLR which had risen some 20% since I first bought in as it started to fall back from the top of a price channel. I also bought into EMV and MVP which are mentioned in my comments above.

My educational portfolio of long-term trades pushed ahead another 1.5% and is now up an annualised 35% since being started in November. It’s been an interesting exercise running a textbook trading program and its has made me question some aspects of my own more short term opportunistic pattern trades, in what has been a trying market. In an endeavour to de-risk my portfolio, given we are now approaching a significant market top (which is likely to be followed by a material correction), I am generally only buying stocks that are coming off significant lows showing strong buy patterns. I’m also adopting the same trendline and higher weekly low stop loss policy as my educational trade examples – ie I’m buying more conservatively and not closing out trades at the first sign of a pullback (unless they have already risen strongly – like PLS mentioned above).

Next week’s outlook seems positive based on the usual drivers, but with the XAO having had 4 higher weeks, a down week or two has become quite likely given the XAO rarely has runs of more than 4 weeks. However, given price has been restrained since the start of the year (think of a stretched rubber band) the pressure to resume climbing higher may see this run extended a little further before a small turn down and a final push to the summit.

Gold remains a concern for me. It fell 0.9% for the week, and while it has closed for 2 weeks above downtrend, which is a buy signal, it still has a reasonable probability of falling around another 7% – 8%. Such a move would see similar falls across the board in gold stocks. Note: I use the EFT GOLD as a proxy for physical gold as that EFT tracks the precious metals price and its chart is more readily available to me via my stock charting software. Incidentally, I use Optuma software which I highly recommend for anyone considering becoming an active trader/investor.

Inflation and its impact on interest rates is seen as the probable catalyst for a future pull-back in the market. That said, the Taiwan issue, should China decide to reclaim it by force, would likely see a fall of Covid proportions. Any confrontation between the US and China would see Australia lining up (reluctantly) behind the US. My hope is that the Chinese, who still need world trade to grow, would see their likely adversaries are also their biggest markets (not forgetting the trillions of dollars invested in the US and its allies which would undoubtably be frozen) – ie the reward doesn’t warrant the risk. More sabre rattling is the most likely scenario – something still likely to unsettle markets.

Contact

Robert Norman

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

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