Weekly Blog - 19 November 2021

Having been away from my desk for a week or so I haven’t had time to update my XAO analysis or look at Stocks to Watch.

From my last listed Stocks to Watch I’ve deleted:

SLR: Price has risen 50% since it started its current run up. Nothing lasts forever and while it may go higher, it needs a breather – and as such a buy now would come with reasonable risk.

JLG: Price has reached the top of its probable range and a buy would come with some risk.

Potential additions are many and a brief summary follows. As I like to keep Stocks to Watch to a limit of 10, I could only pick 3 of the stocks listed below. Once I include a stock I leave it listed until it suggests it may not perform as planned – to allow for the fact that sometimes patterns take several weeks to play out. I’ve chosen to include EVN (gold seems to be on a roll), IFM (coming of a significant low means higher potential gain) and FMG (broken a very significant reversal and Twiggy always seems to kick a goal when he’s down).

EVN, FMG & ORI: Have all broken downtrends recently and coming off significant lows. Many mining stocks seem to be having something of a resurgence. Gold has broken above a long term downtrend suggesting gold stocks in particular probably have good potential.

ECX has been range bound in a rising price channel for 18 months and being at the bottom of said channel there is every likelihood price will bounce up to the top channel and an 18% gain for those agile enough to get in and out quickly.

CGF could jump up to break resistance at $7.22 and if so could make a target of $9.70

ASM: As a relatively new listing, ASM is not my usual ‘cup of tea’ but could break above $14.00 for a target of $18.80

TLS: Seems set to continue its run higher and after struggling to get above resistance at $4.00 it seems to have made that break to suggest a target of $4.23 – but the potential profit from current price may be a bit thin to justify a buy.

IFM: One for the thrill seekers. After a big drop due to the CEO moving on, price has started a significant recovery. Assuming prices return to their previous levels there is a 20% potential gain. A possible price channel supports this view.

BFG: Broken out of a long term falling flag pattern several weeks ago and has risen strongly since. With price currently around $1.85 the pattern suggests price should recover above $2.00 - and a break above $2.00 would suggest a target of $2.40

ARB: Has been rising strongly and a break above $54 suggests a target of $62.

i'll try to update my detailed analysis on the above stocks as time permits.

XAO

The XAO pulled back 0.5% in a lack-lustre week just gone. My own portfolio closed exactly where it started the week - and I'm calling that a win given the fall by the larger market. My educational trading portfolio fell heavily by 1.4%, being its first reversal for some time. That portfolio remains up 24% for the past 12 months.

The XAO is still in the control of several price channels. One large channel that has contained price movements for 13 years.

XAO 19Novbig picturePrice is currently at the top of that range and could struggle to make any material or lasting breakout. A correction to 7460 or 7170 remains a high probability. Since the Covid fall of March 2020 price has formed a smaller rising price channel and while subject to the overarching constraints of the larger price channel, it is possible, were price to break above 7840, make a short run up to 8200. Achieving 8200 would see the correction potential rise to a point that the dam may burst and we fall back to 7500 or thereabouts (a fall of roughly 10%). That would still leave prices near the top of the larger channel, suggesting a bear market could still be needed to ‘reset’ the market. This is all pure conjecture and it needs to be remembered that price channels are just indicators. Look back at pre GFC times and you will see that prices rose more than 100% above the upper boundary of what seemed a good price channel at the time.

Finally, there is even a larger price channel that stretches back to the start of my data in 1982. The larger the channel the stronger its boundaries and this larger channel suggests a top of 8400 could be a ceiling.

A few weeks ago I posted that most recent rallies in the XAO have followed the same momentum (the black lines drawn on the chart).XAO 19Novsmall

I suggested that the current rally could follow that same momentum, but it has fallen a bit short with momentum being lower. This is possibly another sign on the market slowing down and starting to ‘roll over’.

There are a few competing views here, but in summary my expectation is still for the market to move up to around 8200 or even a little more and then correct. This is not a time to take risks and I have materially derisked my own portfolio. Stick to your winners but jump out of trades when they clearly break stop losses. Good luck.

Weekly Blog - 12 November 2021

The XAO fell by 0.15% for the week but there were some good gains to be had amongst the mining stocks. I currently hold PDN (up 12.8% this week), LYC (up 10.3%) and SLR (up 9.4%). SGM was also up 5.9% and none of my other trades fell materially. My trades were up 1.9% for the week. My long-term educational portfolio was up 2.3%

The XAO fell all week apart from Friday to close basically where it started - being a level of resistance. I’d like to think it will break higher next week but it could just stage a rerun of this weeks mixed bag and end up going nowhere.

As I’m currently travelling, I haven’t had an opportunity to consider my Stocks to Watch and they remain unchanged again.

Weekly Blog - 5 November 2021

This week was a breath of fresh air after the ASX doing very little for weeks with my trades up 8.1% and my long-term educational portfolio by 7.0% - so compared with the XAO’s 1.8% gain, both portfolios did well.

My best performer was MP1 (up 10.0%), followed by ARB (9.0%) and JLG (6.0%). Five other trades improved by 4% or more.

However, I’m not sure it will continue as the XAO closed this week back at our old friend – 7780 resistance! I’d like to think it will break higher (something that should see prices push for 7,930), however, for all the reasons I mention regularly (such as the market being at the top of its range) it will be hard for the market to improve much from here. The way the patterns in the XAO have developed over the past few weeks there is overhead resistance at 7,830 which could also stop a run up in the event the all important 7,780 does get broken.

As I’m tied up on another project for the next 10 days there is no Stocks to Watch report this week. If I find time during the week I may update it.

Good luck next week.

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.

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.