Technicals | Jun 16 2020
By MichaelGable
It is time to take a bit off the table. We have been positive on the market since the end of March, and during the last month we have been calling for a move above 6000. As mentioned on a few occasions, you stick with the trend and let it run until you get the sign that it is over. Price action in our market last Thursday was the signal that the run is over for now and that the probabilities now favour lower levels. The market may be higher today, but the bias, in our opinion, is now to the downside. Having said that, we still believe that we are not revisiting the March lows. For the moment, at best, we get a sideways consolidation, just as we saw in March to April.
We also still believe that despite any short-term weakness, our market will have much further upside later in the year. Share markets do very well when economies are in recovery mode, and after being smashed during lockdown, they are set to improve from here. Not only that, but many investors, amateur and "professional", are still sitting on the sidelines in cash – publicly saying that the whole world and the share market are doomed, but secretly just wanting a dip so they can get back in. But let's not get ahead of ourselves. If you want to practice proper risk management, you need to listen to the market and at the moment it is telling us that it could head lower. Time to take the high beta stuff off the table, lock in those profits, and patiently wait for better levels again.
In today's report we have a chart on the S&P/ASX 200 Index to show the key levels to look out for.
Price action on the XJO looks negative for the time being. It formed a classic reversal signal last week which is known as an "evening star" formation (circled). Unless the market can push beyond last week's high, we have to assume that any rallies will be short lived and that the market will drift to lower levels. The most obvious support level would be 5500, which is where the market staged a break-out in late May. That would also coincidentally represent a 38.2% Fibonacci retracement of the March – June rally. It is impossible to know at this stage if that level will hold. If it cannot offer much support, then the next target down would be near 5100.
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Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services.
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
Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). 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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