Could CSL break $400

I’ve been holding CSL for a while based on a long-running pattern that has been playing out. This has been something of a roller-coaster ride while price has also likely been in a falling Wave 4 (Elliott Wave).

I bought in because I saw what I believe to be a Wyckoff pattern in the sideways retracement of this wave (the rectangular pattern on the chart). Running for more than a year now this pattern seems to have ticked all the boxes for Wyckoff (although I don’t profess to be an expert in that theory). Wyckoff suggests that price should now continue to generally make higher troughs and peaks on the weekly chart until it achieves a target that the theory predicts using a Point and Figure chart. The P&F calculation gives an amount that needs to be added to the last level of support (trough) within the rectangle (ie before price breaks out (theoretically) higher. That last level of support probably hasn’t yet been achieved, but assuming the current momentum above the black uptrend line continues then a rough guesstimate of that target is $410 - $420.

The green price channel is perhaps a bit rubbery and subjective but assuming it is on the money and price moves up from present levels to break out of the channel – another charting theory says that price could go to $414. This is a close match for Wyckoff. However, it is worth noting that CSL did briefly break up out of the pattern recently but wasn’t able to continue that push.

When would $400 be achieved? This is really in the area of crystal ball gazing, but if the momentum of CSL’s general rise from 2016 to 2020 was achieved we’re probably looking at mid to late 2023 – so not an overnight success story (and if you hold anything long enough it will probably achieve whatever target you care to use - but theoretically it is worth thinking about).

CSL is a chartists work in progress and I’ll watch with interest how its price pattern unfolds over the coming months.

CSL 26Oct21

15 January 2021

I have been expecting CSL's price to follow the weekly trendline higher but it has now closed below that trendline for 3 consecutive weeks. This weeks candle is particularly bearish whereas the prior week had some positive aspects to it. Cartainly a stock to buy back into when it recovers.

CSL 15Jan2021

13 November 2020

CSL has recently moved up to make new highs and present an interim target of $253.48 although this stock represents potential for a good long term trendline trade. 

26 September 2020

A look at a chart of CSL over the past 30 years will show it has been a consistent and stable performer making it one of the best investments on the ASX. The largest retracement in CSL’s history started February 2020 but may have bottomed in July.

Elliott Wave Count: Unclear given lack of identifiable wave pattern. The February 2020 peak could be the top of W3 with the recent retracement W4.

Trend: Price is in a long-term uptrend and a short-term downtrend. Price has been moving up for 8 weeks and a continuation of this higher prices for the next 4 weeks would see a new uptrend commenced.

Charting signals: Price closed for two consecutive weeks above a downtrend line on the weekly chart (a potential buy signal). Price has made a higher trough on the weekly chart and if price goes above $317.99 it will make a higher peak (another buy signal). Should the aforementioned uptrend form that would be another buy signal.

Backtest: A backtest of the chart since 2011 suggests a buy on two consecutive weekly closes over a valid downtrend line and a sell when prices fall 6% below a higher trough (see educational material for explanation) produced a profit of 220%, 75% and 34% from only 3 trades over the test period where the last trade was constrained by prices falling 50% from their peak in the Covid price collapse before the stop loss was triggered.

CSL 26Sept2020

Contact

Robert Norman

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

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