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.

Weekly Blog - 9 April 2021

My comments re the XAO’s move up last week and what it means for the market were a bit more extensive than usual, can be found on my Stock Commentary page - click here.

The XAO’s 2.7% rise was reflected in my own trades which rose 3.7%. The best performers were SLR (+18%), EVN (+9%) and FPH (+6%). The only stock to fall was SGM (-0.02%). My only transaction for the week was to top up FPH.

Updating my Stocks to Watch proved problematic this week. My picks from last week rose 4.5% on average with SLR the standout performer (up 18%). From 7 new contenders for listing NCM and PLS had the strongest patterns and appear this week. All my prior listings still show potential to rise and none have been deleted. Two stocks that readers might want to look at which almost made the cut were COH and TCL.

The chart of GOLD closed above a downtrend line and assuming next week stays above that level then the chances of GOLD having bottomed and now moving up again are good (but not guaranteed).

One week of good rises is not a rally and investors/traders need to be very cautious about succumbing to FOMO and leaping into what remains a volatile market.

Weekly Blog 2 April 2021

The market is still stuck on ‘repeat’ with no move up or down out of its narrow trading range which saw the XAO close flat for the week (+0.02%). Price has been forming a pennant pattern over the past 2 months and my hope is that price is about to break up out of said pennant. If price breaks above 7110 next week the pennant will be formally confirmed and assuming price closes above last week’s close of 7064, then a break higher becomes more likely than not. Thursday’s candle closed near its high and Wall Street was up along with ASX futures – hopefully setting the scene for a positive start to next week.

Whether you ended in the black or red this week again will have depended on the sectors your portfolio is biased towards and whether it leans towards speculative stock or is more balanced and conservative. As an example, my own holdings were down about 1.5% for the week but the educational balanced portfolio I run as a ‘how to trade’ for students of my material rose by 1.1%.

I sold 50% of my FLT trade during the week as it hadn’t fired as hoped (and showed a potential to fall further). I only sold 50% because I can still see reasons why price could reverse and go higher. I also quit my HLS trade for a lack of performance. Both disposals were break even.

Last week I noted I had bought back a small amount of MYX, being a stock I lost money on earlier in the year. While I have misgivings about buying back into dud trades (because I’m probably just trying to prove I can recover said loss) MYX did spike, jumping 21.4% yesterday. I sold despite the potential for further rises as that jump exceeded my expectations. If it breaks $0.45 it could be worth another flutter.

Despite having seen a few other good patterns I’ve been moving to a less speculative position and am preferring to top up existing trades that are performing, rather than take on new trades that have potential. While my portfolio fell more than the general market, those that did drag my performance down generally seemed to be falling to support levels they could be expected to rise from, and (importantly) none were in danger of breaking stop losses. My trades in travel stocks FLT and WEB moved down, probably due to the Queensland Covid issue. My other travel play, SYD, rose 1.9%, suggesting this sector may still have some potential. WEB fell 7.9% for the week after also making a large convertible notes issue. The debt is convertible to shares at a 22% premium so I’m unsure why that should have had such a negative impact on price. CKF which I decided to hold after it achieved a short term target fell back 6.6% this week to give away most of those gains. In line with my move to de-risk my portfolio I have stuck with CKF because I feel it is just setting itself up for another rally from a level near this week’s lows. The week saw a reversal candle form, suggesting a change of trend is likely – so hopefully next week will see some recovery by CKF. SGM (up 5.5%) and TCL (up 4.2%) were my best performers – other than MYX.

The sluggish market has presented me with a problem in respect of my Stocks to Watch. Rather than (usually) moving after a week or two, my picks more often than not remain glued to the launch pad or fall back. While I expect most of those picks to live up to their promise in time, I’ve decided to revert to only listing stocks I see as having strong charting potential at the time of writing.

Weekly Blog 26 March 2021

The market remains directionless with fund managers and traders waiting for a new trend in price direction to emerge.

This week did show the best weekly result (up 1.4%) since the start of February and (importantly) each day’s trade made a higher high price. In the absence of any news likely to send investors running for the bunkers, I still see the XAO as moving back up to 7360 which would be a new all time high. I’ve had that target on my radar for a few months now and I would expect price to then retrace into a correction towards 6450. Put another way – the market is running on empty.

A correction will set the market up for another rally, but it does mean that speculative stocks, with their share price based on expectation rather than actual performance, will take the biggest hit. BNPL stocks could feature in such a shakeout. I have never been a fan of the BNPL players and with increased competition and little likelihood of them turning a profit any time soon I see their valuations extremely challenged. Z1P which had a peak of $14.53 has collapsed to $7.75 and the charts suggest $6.50 could be a bottom.

Gold looks as if it could finally be turning the corner, having made the best sustained move up since the middle of last year. This month has seen consistent higher troughs and peaks on the daily chart and price has risen to an overhead downtrend which may turn price back down again. If price fails to break higher over the next week or so, there remains the potential for a further fall of 6% - 10%. That said, see my analysis on EVN which suggests gold's bottom is in.

My own trading reflected the general market this week and saw a modest increase of 0.5%, again suggesting the market gains are not being shared equally across sectors. A balanced long-term educational portfolio I’m running showed a gain of 1.25% further supporting the view that in this market the tortoise is doing better than the hare.

This week I bought back into EVN, FPH and MYX as well as topping up HLS and TRS. MYX took some money off me in a trade earlier this year but with the stock having made a buy signal I thought I should try and win some of those losses back (a trading plan I don’t recommend as it never seems to work - but in the case of MYX injured pride got the best of me!).

With my Stocks to Watch I’ve added EVN and FPH. Last week’s list included travel stocks WEB and FLT which took a hammering this week because of suggestions international borders will not open as soon as hoped. The charts still suggest they could move up and my gut feel is that with prices coming off significant lows and the vaccine rollout ramping up, they remain well placed to rise. That said, it is expected in charting that sometimes stocks move back down to retest previous lows before finally breaking higher.

Contact

Robert Norman

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

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