Technicals | Sep 08 2015
By Michael Gable
The Australian market is still preoccupied with the Chinese share market. A mature share market making big moves based on a market which is still very immature. We know that markets are not representative of economies. A case in point is that until the Chinese market took off a year ago, it had been trending lower and lower since the GFC. This is despite GDP growth rates in the high single digits. With growth currently 7.3%, the lowest it has been for 20 years, we are still looking at remarkable growth from the world’s second largest economy.
When the emotion dies down over the next few weeks, and overseas funds recognise how cheap Australian shares are (the Aussie dollar is trading under US$0.70. Falls in the market plus falls in the currency means huge savings for overseas investors), we will be resuming the upside.
To take advantage of this opportunity, we reiterate that the following two types of stocks will likely outperform the market:
1. Large cap stocks (especially those with a good yield)
2. Companies that reported very well in August
An example of the second type of company is M2 Group ((MTU)), which is covered in today’s report.
Five years ago, MTU was trading under $2 so it has come a long way during this time. The longer-term trend is still to the upside so it is simply a case of identifying when to buy in the dips. The last time that MTU underwent some consolidation was earlier in the year when it broke out in January and then rallied from about $8 to over $11.50.
It has now come back to this consolidation zone so there should be some support here. We have also seen a buy signal on the RSI and the MACD is close to showing a crossing also. For the short term at least, we expect some buying support to now come back into MTU. There will be some resistance at $10 and then strong resistance higher up at $10.50.
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
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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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