Weekly Blog 16 October 2020

Another up week for the XAO (1.5%). As the chart shows price has risen to the upper boundary of a price channel which has seen the XAO range-bound since June. My preferred view is that price will break up out of that channel next week to move up towards 6,800. The alternative view is that the XAO will fall back from its current level to around 6,000 before moving up again. While this probably sounds like having a bet both ways (ie “price could go up but it could go down”), until prices move decisively one way or the other all we can do is hope for 6,800 while being ready for a pull-back, if it happens.

My portfolio rose just under 2% for the week – a little better than the overall market. I decided to sell 50% of my small holding in MSB as I could see it going lower (it ultimately lost 7.7% for the week so perhaps I should have sold the lot!). BXB rallied slightly from my stop loss but it was sold this week for a small loss (.06%) as it hadn’t performed as I had hoped and remains in a downtrend. I also quit a small long-term holding in AVH that I had been watching since I got caught when AVH’s price collapsed in March. Price had rallied a bit since the start of August, but this week saw a fall of 6.6% eroding most of those gains. While I think its price will recover, that could be a long process and (like BXB) I believe my capital could be better utilised elsewhere.

My best performers for the week were MQG (up 3.5%), PME (9.0%), ALU (3.9%), MYX (3.1%). Worst performers were LOV (-4.5%), MSB (-7.7%).

Two stocks I’ve mentioned in the last couple of weeks have continued to rise – DSE (up 44% for the week) and BAP (8.7%).

I identified 12 new stocks for potential inclusion in my Stocks to Watch page this week but decided to limit that to six that seem to have the strongest outlook. Two stocks (DSE and PTB) were removed from the list.

Thought for the week:

Many investors have poured into BNPL stocks in recent times. ASIC is about to rule on whether BNPL lending should be subject to responsible lending guidelines (something separately being considered for watering down by the federal government). My guess is ASIC will require BNPL lenders to adopt similar procedures as required by current consumer lending legislation. If that comes to fruition the BNPL business model will suffer a significant hit.

XAO 16Oct2020

Weekly Blog 9 October 2020

What a difference a week makes! Last week it was looking like the XAO was rolling over to go lower only for this week to rise 5.5% - being the strongest sustained rise since April with (importantly) a close at the highest level since the March low. Will it go higher? With volatility caused by market uncertainty due to the economic hit of the virus and the upcoming US election it is impossible to say and we’ll need to wait for next week to see what unfolds. A break higher would be a very positive sign but (despite the popping of champagne corks in the background) be aware that prices often make a major push down before rising strongly or (as could be the case here) a major push up before crashing down.

Last week I mentioned closing out IGO on a broken stop loss and of course the stock’s price has since risen sharply. However, but it could just have easily gone the other way – and may do so if last week’s euphoria disappears. My portfolio performance for the week was 7.0% - a little better than the overall market. This result was gratifying given it includes a 14.5% fall by MYX after a failed/delayed application to the FDA. Speaking of the FDA, MSB has recovered 5.6% for the week but I’m having second thoughts about holding onto this stock in the hope of better times because it looks like any recovery could be long term and, if so, my funds could be better utilised elsewhere - but I’ll wait and watch for a little longer.

Last week I mentioned WGN and DSE as a couple of stocks that had made promising patterns and included them on my Stocks to Watch page. I bought and sold KGN this week for a 12.5% gain but should have held on for my target as it made 28% for the week. I passed over DSE but it also rose by 21% before falling back to close 12% up for the week.

My best performers were PLS (17%), EOS (14%), BID (10%), PPS (10%), LOV (13%) and MQG (9%). The latter two were purchases this week after strong patterns being identified. Apart from MYX all trades rose except TCL (-0.9%).

See my Stocks to Watch for potential tradeable patterns identified this week. With the surge in prices many stocks have commenced building tradeable patterns, most of which will probably come to nothing. Consider the stocks mentioned only as “potential” trades. If you don’t have reasonable charting skills (or have not read my educational material) and cannot do your own analysis (and especially set stop losses), then you shouldn’t trade them.

If you read Stocks to Watch last week you would have seen BAP and ECX were listed as potential trades. This proved to be a good call as BAP rose by 10.8% this week and ECX 8.4%. Both are approaching their suggested targets and while there is nothing to say they will stop at said targets, a short term trade would now be high risk.

Weekly Blog 2 October 2020

This week the XAO lost 2.6% to make its lowest weekly close since June, erasing all gains for the past 3 months. Price has fallen to the lower boundary of a possible price channel (see last week’s blog for chart) and it isn’t impossible that the boundary will support price into higher prices next week. That said, the market hasn’t had such a negative feel about it for six months and I wouldn’t be surprised to see 5830 tested next week. Trump testing positive to Covid19 has startled the US market – which was reflected in the ASX falling off a cliff late on Friday.  It is possible the market may decide Friday’s selling spree was an over-reaction and Monday will see those losses pared back.

The weak market has caused several stop losses on the brink and I’ll need to consider closing these trades out next week if the falls persist. BXB has breached its stop loss by a bee’s whisker, making a bearish engulfing candle for the week. Looking back over the chart history there seems to be some evidence that BXB often recovers in the week following this type of candle – so I’ll give it a little more time.

I have to admit to buying a small parcel of MSB because having broken above resistance with a potential target of $6.44 and making higher troughs and peaks it was a technical buy. Charting aside this was a high risk trade as I was aware a decision was pending from the FDA on an approval for MSB’s drug treatment. I expected the price to rocket on an approval but otherwise tank. The FDA ultimately asked for further evidence of efficacy, causing the price to initially fall by 45% and close 37% down. I’ll hold because (a) the damage has been done and (b) price often recovers after these strong falls as bargain hunters move in.

I also bought BID this week and while it initially rose, price has moved back with the general market sentiment.

IGO was sold after breaking its stop loss resulting in a 11% loss on a small initial buy in.

There aren’t many winners in a market such as this week’s, but several of my trades ended in positive territory – CSR, VOC, MYX, PPS. Of course there were losses as well with TCL down 6% and CSL and BXB losing 4%. The balance of my portfolio saw a fall of about 1% for the week – which was better than the market.

At the end of the week I usually look around for stocks that might be making tradeable patterns. Needless to say pickings are a little slim this week but for those with an appetite for higher risk trades, WGN and DSE came across my radar. I have briefly commented on these two in my Stocks to Watch page.

Weekly Blog 25 September 2020

The XAO closed up 1.4% for the week, making it two positive weeks in a row – as compared with the US having 4 sequential weeks lower. Price is still trading within the range of a rising flag pattern and last weeks candlestick pattern suggests a rise next week. On the daily chart Friday closed 0.3 points higher than the previous peak on 16 September. Technically, a higher peak but given the margin I wouldn’t necessarily read the promise of higher prices into this. As I write futures are in the green and the US had a positive Friday their time.

The push up was in part driven by the finance sector on news the government plans to ‘abandon’ responsible lending guidelines. I suspect this is a media sensationalism (or a poor choice of terminology by the government - again). From what I’ve seen it only means that lenders will be able to rely on borrower’s claims as to their disposable income. Assuming the eventual legislation reflects that I expect business much as usual by the Banks and the windfall some investors might be expecting will evaporate and share value will be challenged – especially when bad debt write offs from the virus driven recession start to show up and eat into provisions.

On the negative side, this week has seen a lower trough on the weekly chart – usually considered a sell signal.

XAO 26Sept2020

I’m still moderately comfortable that price will move up and possibly break up out of the flag pattern (It would need some confidence to come into the market to see this). The alternative is price might rise but fall back before making a higher peak and then fall down out of the flag with a lower trough. This would be a major negative and suggest new lows of 5830 or 5400 are likely. It remains a time to watch your investments closely and have good tight stop losses – just in case.

This week I sold SXY for a gain of 9% and SPK for a small loss (2%). I bought SPK in 3 tranches in line with my trading plan (Got one? You’re gambling if you don’t). Made a profit on the first tranche, broke even on the second and lost on the third. This trade started in April and didn’t move up as expected (hence a long hold for me) and has been in a very slow decline since the start of August. I suspect it will probably recover and head up towards $5.00 from its Friday close of $4.33 (especially given I’ve sold – it’s Murphys Law). However, at the time I sold there was a good probability of lower prices and my stop loss was broken in an uncertain market. I have a couple of other trades underwater but hanging on above stop losses that I’m watching closely.

I also topped up my holdings in TCL and CSR this week as both are performing well. A share I traded a couple of weeks ago and sold at target (TSO) fell back 17% from its subsequent high, rose 16% and Friday closed up 10% from where I sold. The extreme volatility has kept me out of the stock.

Stocks with a bullet on my watch list this week are PTB, PPH, COH, WOR – but as noted above this is an environment to be cautious of and a time to ideally stick to larger cap shares. See Stocks to Watch on my Stock Commentary page for a summary.

For the week 10 of my holdings rose and 6 fell and while I don’t track a weighted average it was about a break even result dragged down by two small holdings in PLS (down 17%) and AVH (12%). AVH is recovering and broken above a downtrend. PLS will break my stop loss unless it closes higher this week. The sharp loss might be due to concerns over Lithium prices with Tesla entering the industry to push battery costs down. Best performers for me were TCL (up 8.4%), PME (5.5%), CSR, CCL (4% - 5%).

Weekly Blog 18 September 2020

The XAO showed a 0.3% gain this week, or put another way it hasn’t gone anywhere. It did rally a little earlier in the week before drifting back. On the positive side it is still making higher lows and higher highs, however, a fall below 5992 would break that run and see the potential for price to fall to 5830 and if that doesn’t hold - 5400. I’m still leaning towards prices recovering and going higher but I’m less optimistic than I was last week. The US market is nervous with the forthcoming US election and tech stocks have fallen out of favour.

I’ve been through my portfolio several times this week to identify stock showing signs of weakness, not performing as I had hoped and reviewing my stop losses. It will be necessary to jettison a few of these if the gathering storm clouds do more than just threaten. Again, it is not a time to buy unless some irresistible opportunity arises.

I did come across one ‘too hard to pass up’ pattern on a small gold miner (TSO). It suggested a rise from $0.24 to $0.30 when I became aware of it on Wednesday. I bought on Thursday and sold on Friday for a quick 15% gain. I probably sold prematurely on Friday when price stalled and the market in general was sliding. Ultimately, it rose 32% yesterday to close near my target. With the weekend coming I felt a ‘bird in the hand’ approach was appropriate.

I also bought PPS (which I mentioned in a recent blog). I also bought more CSR which has moved up and shows what I believe to be a potential to go higher.

I reluctantly sold SPK as it just hadn’t performed as expected and has been falling back with the potential to fall further. I bought SPK in three tranches and made a profit on the first, broke even on the second and lost on the third. Overall, it was a very small loss on the trade. I feel it may very well recover, but the charts don’t agree.

In general, my portfolio did OK this week with the standout performers being PLS (up 16.2%), CSR (7.4%), MYX (6%), AVH (9%) – and of course TSO mentioned above. The biggest loser was VOC (down 5%) but still in positive territory from prior gains.

Of interest, the big building stocks – ABC, BLD, BKM and CSR (the only one I hold) are all moving up strongly.

As noted, this isn’t really a time to buy but I’m watching COH, NUH, ORI, PPS, RED, SAR and SGM for opportunities.

Weekly Blog 11 September 2020

With the XAO down 1.1% for the week it has now fallen for 3 weeks in a row with the last 2 of those closing below an uptrend line – which is a formal sell signal. If the XAO falls below 5,992 then it will have made a lower weekly trough and if this is followed by a lower peak, it is starting to look like a more sustained rout might be on the horizon. A fall to 6,000 or even 5,400 is possible, but as said previously my favoured view is that prices will push up to 6,800 or 7,200. Perhaps the road map ahead is a pull back and then a move up – but it's not a time to panic.

This week I bought TCL, perhaps a little prematurely because, despite losing some ground this week it has made two consecutive closes above a weekly downtrend – which is a buy signal. I also bought CSR which I commented on last week and my trade remains in profit (but only just) in spite of an adverse week.

I sold RED for a small profit as it hadn’t performed as hoped.

A few stocks I am watching are building potential tradeable patterns. Long-term trade potentials are WOR, OZL and ORI, while short-term trades might come from the likes of NUH, COH, BLD & SGM.

Weekly Blog 4 September 2020

This was a roller coaster week – 3 days down followed by 2 days to climb back to exactly where the week started - only for things to fall off a cliff on Friday when the XAO fell back to almost precisely (but importantly, not below) Wednesday’s low. Price is sitting on the lower boundary of a price channel that’s been holding since 15 June. If prices keep heading lower next week and break out of the channel, I’d expect it could fall back to 5,832 (8% off last week’s high) which would almost be a technical correction (10% decline).

This week I sold BHP after it fell back 6% and broke my stop loss. My trade was about break even but having sold when the stock went ex-dividend, I made a small profit (including the dividend) of about 2.2%.

I also sold AGL when it broke my stop loss. It had a drop of over 11% on an release that failed to impress the market, recovered a little and then fell lower to make a new 5 years low. The trade never fired so it never advanced beyond the original tranche meaning my exposure was small (I initially buy about one third of my planned total purchase and then top that up as price moves up).

I bought SXY during the week (see last week’s blog and my stock commentary page) and after today’s stumble by the market I’m still in profit – so hopefully next week will see SXY move up.

I’ve seen a number of promising trades building through the week but with today’s decline possibly predicting more falls next week, now is perhaps not the time to buy. That said, one that did catch my eye was CSR. I backtested CSR this week to determine some long-term trading rules and it really showed a great result with 5 positive and no losing trades from 2015 to date. The overall return was 221% based on the simplified trendline trading technique outlined in my educational material. The backtest also confirmed a new trade could have been entered in April and as price is currently not far in front of where it was back in April, I may buy in next week (assuming market Armageddon doesn’t seem to be happening!). The backtest will be on my video stock commentary soon – check it out. CSR was one of only a few stocks to rise today - that has to be another positive.

Weekly Blog 28 August 2020

The XAO did manage to move up a little this week, 6300 remains a line in the sand that XAO can’t get over. As it has made a higher low followed by a higher high, maybe next week with see a break higher and my target of 6,800 become more likely. The alternative view, and possibly the most likely, after the last two weeks have made doji which are reversal candles. While, a fall next week (or next couple of weeks) back to 5800 is quite plausible, my preferred option is a break higher as I can’t see what the catalyst would be that sent the market lower. Perhaps Trump will throw a few more rocks at China’s windows!

 There have been some big rises and falls on the ASX 300 this week, with SPL the standout achiever up 38% and WHC the biggest loser - down 27%

There are a number of interesting trade opportunities on the radar this week and I bought VOC, M7T and PME – all of which I flagged as potential trades in last week’s blog. I also bought back into EOS and FPH having sold out of successful trades recently. BHP and SPK were existing trades that I topped up after their price moved up.

On the negative side of the ledger I sold out of trades in IPH and IPL both for losses (12% and 7% respectively) after their price broke stop losses. I usually buy my shares in 3 tranches as explained in my educational material and neither stock had moved up so both were a minimal holding.

What do I like this week? The stocks below have apparent entries for trades and while there are many other potential opportunities, I’ve only looked at stocks on my extended watch list.

SXY has a potential 11% gain based on a resistance break pattern. SXY is a tricky beast to trade and often doesn’t do what is expected.

PPS is a classic Trendline Trading Technique entry – closed above a downtrend and making higher lows and highs. The only negative apparent to me is that price could fall into Elliott Wave 2 and head back towards the $0.30 area. I need to post a video of a backtest.

XAO 27Aug2020


Robert Norman

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

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