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.

Weekly Blog - 30 July 2021

This week the XAO broke convincingly above the resistance that has been keeping it rangebound for weeks. It then fell back to retest said resistance before closing a little higher. This week’s candle was a doji and while a doji should ideally open and close at the same price and as such have no body, ours has a small body. However, I’m still treating it as a doji which is considered a reversal candle because it shows indecision in the market which can lead to a pullback. Personally, I’m sticking with the theory that the break above resistance will lead to higher prices ahead. Reporting season is predicted to show strong results, and if that proves to be true it should light a fire under prices. However, we remain at a market high and the time for a pullback draws ever closer so conflicting pressures on prices continue.

XAO 30Jul21

While the XAO closed flat it was a fairly good week again for me as my portfolio moved up 1.1% for the week, aided in no small part by LYC which rose 14%. I also closed out a trace in ECX for a 15% profit after a spike this week. I’ll continue to watch this stock as I feel it will go higher but could first retrace a little. Gold finally moved up a little taking my NST and NCM trades with it, but regretfully EVN sits stubbornly on the launch pad. CUV again fell away and 50% of the trade was sold after a stoploss break on the daily chart.

My Stocks to Watch were a mixed bag with small moves apart from LYC and ECX as noted above and SLR, which fell back 5.0%. I've removed ECX because I think it has had its run for now, but remains one to keep an eye on. I need to spend some more time reviewing potential trades and will update Stocks to Watch later. Anyone interested should check back Monday.

Weekly Blog - 23 July 2021

After big losses across the board on Monday and Tuesday the market achieved three positive days in a row to finish up 0.5% for the week.

Market sectors were mixed with health care up 4.7% for the week while gold was down 4.7%. Consumer Discretionary, Financials and IT were all up about 1.5% on average while Energy, Resources and Materials fell by a similar amount.

Looking at the ASX 300 NCX, PNV and ILU all rose buy just on 10% while the biggest losers were PLL (-18.6%), DTL (-11.9%), SLR (-11.0%) and SSM (-10.0%)

My own trading saw the best result for some time with good moves up by everything except gold – which held my overall performance to 0.9% for the week. ILU (+10.0%), CUV (+7.1%) and CSL up (5.7%) were the stars while ENV (-9.4%), STO (-6.1%) and NST (-6.0%) dragged my portfolio back.

My Stocks to Watch last week generally performed well, moving up 1.5% on average. EOS rose 9.3% and LYC 4.2%. AIA fell 5.6% - perhaps on response to the worsening Covid outbreak popping the NZ/Australia travel bubble. However, the fall was only back to trend and providing price can hold above $6.70 the chance of a reversal of fortunes appears reasonable. I’ve added SLR, WTC and XRO this week. See my Stocks to Watch page for individual analysis.

Where to next week? The XAO has made a new all-time high which could spur further rises next week. The XJO broke marginally above a pattern where a break up also would suggest further rises. However, my enthusiasm is tempered somewhat by both indices showing lower than usual volume. While the jury is still out on next week’s direction my feeling is further moves up are likely, driven by strong profit reports from the US.

Weekly Blog - 16 July 2021

The XAO rose 1.1% for the week but this was probably a result of recovering some losses from last Friday’s sharp fall. The bigger picture shows the market has gone nowhere in the past 6 weeks, with open and closing prices falling in a narrow range of 7540 to 7630. 7650 is proving to be an impenetrable level of resistance with price having turned back from this level on 3 occasions in the past 6 weeks..

As always price can go either way, but my expectation remains for a break above 7650 with higher prices to follow – but need to bear in mind the market is at an all-time high and primed to correct.

My own trading mirrored the larger market (up 1.1%). Volatility of my holdings has reduced and there were no major rises or falls other than FMG (which I bought this week to be up 8.0%) and NST (up 6.2%). I’ve been holding NST, NCM and EVN for the past few weeks as my analysis suggested gold was likely to rise. While those trades have generally moved lower since entry, they recovered some lost ground this week. EVN was the disappointment, only rising 2.7% for the week after falling heavily yesterday on a trading release. The release didn’t strike me as negative, but clearly it wasn’t positive enough for some. I’d expect EVN to recover those losses next week. Looking at GLD (Gold spot price index) it is rising off a significant low at the end of March 2020, has broken above a weekly downtrend, and had been making higher troughs and peaks (up until June) on the weekly chart – all of which are buy signals as they suggest higher prices. This run was broken by a sharp decline throughout June when price fell back to retest an underlying long-term support that has been in place since 2018. Price has closed higher each week since the start of July making it technically a counter-trend buy.

The XGD (ASX gold index) not unsurprisingly mirrors the performance of physical gold.

Trawling through the XAO looking for potential patterns, the overall impression is that many traditionally strong stocks are trending down and don’t present as strong buys just now. However, AIA, FMG, LYC and BOQ do show potential breakout patterns. FMG’s prospects will largely be determined by the iron ore price – which is currently at an all-time high and as such (like the stock market in general) is at risk of correcting. LYC is the only stock of those picks that has actually made a breakout of a pattern confirming it as a technical buy in my opinion.

With my Stocks to Watch I’ve removed VUL as it achieved its projected 30% gain before falling back from that target. PTM also got the chop as it made a lower low on the weekly chart. AIA and FMG were added.

Contact

Robert Norman

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

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