Technicals | Mar 08 2016
By Michael Gable
In our introduction last week we started off by saying that things aren't as bad as people expect and when they realise this, the market will star to rise. But going up 262 points in the last week is a pleasant surprise. If the start to the year was one of the worst on record, it means that finally stringing together a few days up in a row can only be good for sentiment. As a result, we turn to the chart for the S&P/ASX 200 Index in today's report and give you some targets to now aim for.
Just as overseas hedge funds a few weeks ago were telling us Aussies why our property market is doomed and why we need to be shorting the banks, the share prices started soaring instead. Nearly $8bn of short sold bank shares need to be covered and this is why stocks like ANZ are up 16.5% from their intraday lows two weeks ago. With a yield of 6.9% before franking, that represents a fantastic return for the "brave" who ignored the noise and bought instead of sold.
Resource stocks are now the flavour of the month. Longer term not much has changed for the materials sector, and we would still exercise some caution – looking to eventually sell into the rally. But the fact that the blue chips are bouncing here indicates a good low could be in place for our market as the big funds step back into the Australian market. This is a very different sentiment to a few weeks ago.
Unfortunately many in the media report on headlines and do not have experience of actually managing money. At the end of the day, if you want a realistic opinion on whether to worry about something or not, ask the person who is managing money and has responsibility and accountability for their opinions, not the person who's job is to come up with the next big headline. As a result, we will continue to skip over the fear next time it comes back and continue to find opportunities despite the short-term noise.
The ASX200 formed an inverse head and shoulders which was finally breached last week. We have circled the two shoulders and the diagonal line is the neckline which was breached. If we measure the distance between the neckline and the head (indicated by the "down" arrow), then the market is likely to gain that distance beyond the neckline. That is, it is likely to rally up towards the top of the "up" arrow which would see the market head towards 5350.
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Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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Disclaimer
Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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