ASX 200 Bias To The Downside

This story features WESFARMERS LIMITED, and other companies. For more info SHARE ANALYSIS: WES

By Michael Gable 

Market sentiment has obviously taken a turn for the worst. You don’t drop 200 points in two days without scaring a few people into bailing out of profitable positions. Our focus on finding shorts over the last few weeks has at least helped to an extent, with Qantas ((QAN)), Myer ((MYR)) and now Wesfarmers ((WES)) struggling a great deal. Perpetual ((PPT)) looks like a good shorting opportunity here, as well as QAN again after a dead cat bounce. With the way the market is at the moment, any bounce for a couple of days is an opportunity to put hedging in place, whether that is by shorting overvalued stocks, or writing calls against existing blue-chip shares.

In terms of buying opportunities, the pick would have to be National Bank ((NAB)). Now that it is trading 10% under its recent high, and a dividend due on Thursday, a great way to play that trade is the buy-write strategy. I would consider buying the stock here and then writing a call against it in order to hedge some of the downside.

ASX 200

As mentioned last week, we needed to see the XJO break 5060 before looking at more bearish levels. We can see on this weekly chart that the market went to a new high while there was divergence with the RSI. The furthest downside I anticipate is 4600 as discussed a few weeks ago. Whether we get there remains to be seen. It depends on what happens around 4800. We could bounce off that, go to a new high for a triple top and then descend down to 4800 – similar to what happened at the end of 2009 – early 2010. Otherwise we may just breach 4800 in the next couple of weeks and take a quick dip down. Either way, the bias is on the downside for the time being.
 

Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
 
Visit Michael Gable's website at  www.michaelgable.com.au/.

After leaving Macquarie Bank's Securities Group in 2008 after many years of service, Michael has gained a highly regarded reputation in the financial services industry. As a Private Client Adviser with Novus Capital, Michael has become a popular live commentator and analyst for Sky News Business Channel’s “Your Money, Your Call” program. He is also the author of the weekly stock market report “The Dynamic Investor”.

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management.

Michael 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

Disclaimer

Michael Gable is an Authorised Representative (Rep. No. 376892) of Novus Capital Limited AFSL 238168 ACN 006 711 995. Michael Gable and Novus Capital Limited, their associates and respective Directors and staff each declare that they, from time to time, may hold interests in securities and/or earn brokerage, fees, interest, or other benefits from products and services mentioned in this website. This website may contain unsolicited general information, without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you must consider the appropriateness of the information in this website or the Product Disclosure Statement (PDS) or Financial Services Guide (FSG), having regard to your objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance. Michael Gable and Novus Capital Limited believes that any information or advice (including any securities recommendation) contained in this website is accurate when issued but does not warrant its accuracy or reliability. Michael Gable and Novus Capital Limited are not obliged to update you if the information or its advice changes. Michael Gable and Novus Capital Limited and each of their respective officers, agents and employees exclude to the full extent permitted by law, all liability of any kind, in negligence, contract, under fiduciary duties or otherwise, for any loss or damage, whether direct, indirect, consequential or otherwise, whether foreseeable or not, to the extent arising from or in connection with this website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms