Is Sonic The New CSL?

This story features SONIC HEALTHCARE LIMITED. For more info SHARE ANALYSIS: SHL

By Michael Gable 

Another week, another “issue” to punish the market for daring to go to 5 year highs. This week it’s the US budget and debt ceiling. The last time we went through this in early 2011, the Dow Jones was down 6.7% in a month. The next pullback in our market should only be in the order of about 5% in our opinion so once again it seems as though the badly performing month of October will uncover some buying opportunities. One statistic that we found interesting was that US 10-year treasuries have had their fourth week of gains, which is the longest winning streak since April. So on the one hand that is telling us that there is still cautiousness in the market; on the other hand it is telling us that the recent rally has not been driven by a great “bond to equities” rotation. This great rotation that everyone speaks of hasn’t even started yet. So it once again tells us that a dip in the markets is an opportunity to buy. Avoiding the bad stocks is just as important as picking the good ones, so this week we have continued to analyse companies which are best to be avoided for now. We have countered that with some great looking long trades in our charting section.

Sonic Healthcare

 

This weekly chart of Sonic Healthcare ((SHL)) clearly shows the longer term bullishness of the stock. SHL had spent the last 5 years consolidating into a point before we finally noticed it breaking out earlier this year in the $13 region. So far it is continuing to do what is expected of it, and that is rally towards $18 before finally hitting the low $20’s. With such a long period of consolidation behind it (5 years), we should expect it to now have plenty of steam to get it to those levels. You only need to look at CSL to see a similar pattern emerge where it too also consolidated for a number of years before breaking out 2 years ago and doubling in value. SHL is still on track to reach much higher levels from here so any weakness is still a buying opportunity.
 

Content included in this article is not by association necessarily 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.

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