Upside For JB Hi-Fi

This story features JB HI-FI LIMITED. For more info SHARE ANALYSIS: JBH

By Michael Gable 

Last week saw a nice bounce in the Australian market, but we still maintain that there will be some more short term weakness before a more sustainable rally kicks back in. There is a growing feeling that further cuts in interest rates are just around the corner, with some economists predicting two rate cuts next year. This is clearly a long way from several months ago when there was consensus that rates would be going up in mid 2014. It’s a reflection of weakness in the economy of course, but attention needs to then focus on the beneficiaries of lower rates and that still remains high yielding stocks such as banks.

It also should benefit retailers such as JB Hi-Fi (we look at the chart in this week’s report). The Australian dollar dipped under US$0.83 this week and it appears to be heading towards support around US$0.80. Perhaps that would also signify a low in the Australian market as foreign money becomes comfortable investing back into Australian shares. So while many people are hoping that last week’s strength is the beginning of a Christmas rally, we may need to be a bit more patient and wait for a lower point in the market to get excited again.
 

JB Hi-Fi ((JBH))

Price action for JBH is looking very positive again. Since finding a low in October, the stock rocketed up 10% on the day of the AGM. Since that day, the stock has tracked sideways for several weeks. It is bullish if the market, despite some of the recent falls, cannot overcome one day’s worth of gains over several weeks of trying. The number of stocks sold short has also decreased so it appears as though short covering has taken hold and JBH should gravitate higher over time. The stock is currently at the bottom of its recent range which is attractive, but more conservative investors would like to see a break out of the top of this range (the recent range is indicated by the solid blue lines). Upside resistance can be found around $17.50, but a pushing through that level could see the stock head towards the high $19’s again.

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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

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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