Qantas Prepares For Descent

This story features QANTAS AIRWAYS LIMITED. For more info SHARE ANALYSIS: QAN

By Michael Gable 

There is a fair bit of data coming out this week which will hopefully give the market a catalyst to continue that climb into the end of the year. One event that we find interesting is Friday's meeting of OPEC. We get asked all the time about energy stocks because they are historically very cheap. As we've mentioned plenty of times before, we just don't know when the oil price will go up again, so its best to not allocate more funds to that sector. The reason why the oil price is so low is because OPEC is keeping the supply high to drive out the American producers. Until they cut their supply, the oil price will stay low, and energy stock prices will stay depressed. It is as simple as that.

A Reuters survey showed that OPEC supply rose in November to 31.77 million barrels per day from 31.64 million in October. So chances are that there will be no major announcement in regards to cutting the oil supply, which means another long period of depressed prices. OPEC meet every six months so it will take another half a year until we maybe have a chance at looking at oil stocks again. Any investment before then is high risk.

Another area of high risk are stocks with fundamental issues that are entrenched in a technical downtrend. In the last week, we have seen huge falls in stocks like Dick Smith and Slater & Gordon. Sometimes investors can find it hard to know whether to bail out or not. If the company is drilling holes in the desert and making no money, then its an easy decision because of the risk that the company goes bust. However, Dick Smith and Slater & Gordon are making money and have value and that can make it hard for the investor to sell out, knowing that the value will be realised at some point.

Today we look at Qantas ((QAN)).
 

 

QAN shares have been edging higher the last several months but in the shape of a rising wedge. This is a negative sign because the usual break is to the downside. That is, a move under the lower diagonal blue line would indicate a steep drop for QAN. When a stock breaks out of a rising wedge, it tends to find support at the base of that wedge. In this case we are looking at a target of $3 for QAN.

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.

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