Opportunity In Aristocrat Leisure’s Pullback

This story features ARISTOCRAT LEISURE LIMITED.
For more info SHARE ANALYSIS: ALL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The Chartist sees a healthy pause in Aristocrat Leisure shares, following the breakout, setting the stage for another leg higher.

By The Chartist

Technical discussion

Reasons to be cautiously optimistic:

• Management has reiterated its US$1bn FY29 interactive revenue target.
• Content franchises continue to dominate.
• AI could be an opportunity rather than a threat for incumbent slot suppliers.
• A 1% rise in market share equates to an estimated US $11m in revenue.
• Has pushed above a zone of resistance with conviction.

A straight-line leg higher had taken Aristocrat Leisure ((ALL)) above a solid zone of resistance during our last review. It looked overbought in the short term, so a small retracement or period of consolidation was on the agenda.

As can be seen, that has transpired over the past few weeks. That said, yesterday saw price break higher with attitude. There was also follow-through strength today, though it wasn’t the only one.

It was a strong session by the XJO, which was much-needed, as it has been struggling. The big question now is whether momentum can continue to build, both here and in the broader market. A quick look at the monthly chart (not shown) shows this company has been a stellar performer over the years.

Back in 2003, it was sitting at a lowly $0.74. We don’t need to do the maths to realise a multi- year trend has resulted in a large percentage gain. There’s no reason to suspect that a major high is going to be made any time soon.

The trend is up, it’s strong, so there’s no reason to fight it.

Bigger picture, the stock should still be heading higher via a multi-year trend within wave-[3]. Due to the potency of the trend and the lack of meaningful retracements, I can’t project an upside target.

Perhaps not ideal from a pure Elliott Wave perspective, but it reiterates how strong the trend has been. There is no wave count at a smaller degree, which again comes down to the lack of countertrend moves.

That’s fine, as we are quite happy to use more conventional patterns. In terms of the volume, there is nothing not to like. Average volume started to increase on the run-up to the low being made in mid-March.

That’s often a precursor to a turnaround. Zooming in on the recent action shows that it decreased significantly during the recent sideways meander. That’s also positive, as it suggests the smart money isn’t exiting. It’s likely just a few mum and dad investors taking profit off the table.

At front and centre on this chart is the old zone of resistance, which is now acting as support. It would have been ideal for price to have come down to revisit the upper boundary of support, yet not to be.

As stated above, a micro consolidation pattern has formed and broken to the upside. One brief probe lower to just below $6.00 would be ideal in many ways, but the action over the past couple of days suggests it’s a low-probability scenario.

The company has taken a breather over the past three weeks, so the stage is set for the uptrend to continue.

Trading strategy

The breakout a couple of days ago would have been a good time to jump on, but all is not lost.

There are a couple of things to look out for.

The first is another retest of the zone of support, as it would provide a low-risk entry.

Alternatively, should price head higher immediately, we’ll need to remain patient and await the next short retracement or pause.

We’ll keep it on our watchlist, but I wouldn’t be chasing it higher from here.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena’s (see our disclaimer).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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