Upside For Woolworths

This story features WOOLWORTHS GROUP LIMITED. For more info SHARE ANALYSIS: WOW

By Michael Gable 

The market last Thursday had its biggest single-day gain of the year so far. This was on the back of comments from the US Federal Reserve that interest rates will remain lower for longer than thought (something we have commented on previously as being a big factor to take into consideration). We have also seen improvements in the iron ore price and the HSBC Chinese flash PMI also rose above 50 for the first time this year, up to 50.8 in June from 49.4 in May.

As a result, some stocks that we touched on last week as being poised to rally (such as Flight Centre, JB Hi-Fi, BHP Billiton, etc) have jumped nicely. We have also found some more stocks that look like finding good lows here on the charts. In terms of top 20 stocks, we are confident that Woolworths will once again trade higher from this point and that provides an opportunity for the conservative investors.

Woolworths ((WOW))

Woolworths peaked at the end of April and has now made a 3-wave countertrend move, dropping about 9%. WOW is between the support levels of $35 and $36 but we have noticed that it has now provided a buy signal on the RSI (circled). Often when WOW does this, it goes on to trade higher. Also circled are the other two occasions in the last 18 months that it has done this. Therefore there is a high probability that this is a low for WOW and it should now trade higher from here. Apart from buying stock, one alternative strategy is to sell longer dated put options from this price level.
 

Content included in this article is not by association the view of FNArena (see our disclaimer).
 
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

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.

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