Downside Risk For SGH

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This story features WOODSIDE ENERGY GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WDS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

Shares in SGH Ltd have stabilised around $42, but Fairmont Equities' Michael Gable reports the technical outlook remains cautious.

By Michael Gable 

The big news of the week, of course, is the “deal” to end the war in Iran and “open” the strait.

Yes, we can’t help but put some words in inverted commas because in reality we have an unsigned MOU and a strait that is closed until Friday which is still riddled with mines and where insurances and tolls will now need to be negotiated.

As a firm that is bullish on oil, what do we make of this?

Our view hasn’t changed.

For the past few months, the main action that was keeping a lid on prices was the release of oil from strategic reserves. That now sits at a 43-year low.

We also had numerous dips in the oil price due to tweets from Trump proclaiming progress along the way.

We now don’t have the luxury of good news to drive down the oil price. It’s already out there.

We also don’t have the luxury of endless reserves of oil as supplies continue to be drawn lower. In other words, the -3.6% decline overnight in the oil price (which we believe held up remarkably well) was probably about as low as it can be pushed based on rhetoric and headlines.

Now we enter a phase where physics and math will determine what happens to the oil price from here.

Further to that, we noticed that a Goldman Sachs survey from two weeks ago of 839 institutional investors found that a record two-thirds were expecting lower oil prices from here, the most bearish reading in the 10-year history of the poll.

We state once again, oil is the complete opposite of a crowded trade. Next to no-one owns it — yet.

If you didn’t get exposure to energy at the start of the year on our advice, then it is not too late. Best to get in now before everyone else starts scrambling.

It is probably no coincidence that Woodside Energy ((WDS)) yesterday had to repel rumours of a takeover approach by Exxon.

The executives at Exxon can obviously see what is coming from here even if everybody else chooses to keep their heads in the sand.

I expect that we haven’t heard the last of this.

Today, we offer a technical view on SGH Ltd ((SGH)).

When we looked at SGH on 18 November, we noted it had broken the uptrend and we were looking for support closer to $42.

It managed to exceed that downside target, and the shares are now trading sideways near $42.

For the chart to look positive, it needs to break above the resistance zone that is building up near $43.

That is, until we can see a clean move above $43, the risk is still to the downside.

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)

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

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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