ASX All Ordinaries Index (.AORD) Market Round-Up
Last week, ASX All-Ordinaries Index (.AORD) showed some weakness after two consecutive rallies in the prior weeks. Notably, .AORD settled at ~7502.80 with a decrease of 0.17% for the week ending February 18, 2022. Overall, the domestic markets are trading in a range with a weak bias. Meanwhile, the Australian seasonally adjusted employment data released last week by the Australian Bureau of Statistics (ABS) rose by 12,900 in January 2022 to 13,255,000 up by 0.1% compared to the prior month.
However, the overall ASX indices are trading with a weak bias after the broad index broke an ascending channel pattern by downside on a weekly chart indicating a possibility of further downside potential. As per the technical indicators, prices are currently trading below the 21-period SMA and 50-period SMA and the next resistance level appears to be at 7659.99. The upcoming macro events that may impact the market sentiments include an update on the Australian Wage Price Index, Australia Private Capital Expenditure, US Preliminary GDP Second Estimate for fourth Quarter 2021, US Core PCE Price Index and US Unemployment Claims data released Weekly.
Global Markets Wrap-Up
Wall Street indices extended their weakness last week. Notably, S&P 500 settled at 4348.87 with a decline of ~1.58% while NASDAQ Composite Index also declined sharply to reach 13,548.06 losing ~-1.76% for the week ending February 18, 2022. Meanwhile, the US indices decreased last week due to an increase in the US unemployment claims data. The seasonally adjusted initial US unemployment claims data published by the US Department of Labor surged by 23k to 248k for the week ending 12th February 2022 against the revised unemployment claims at 223k in the prior week.
Having understood the US market performance over the past one week, taking cues from major global news, and based on our technical analysis of ASX All-Ordinaries Index (.AORD) for the upcoming week, now let us have a look at two ASX-listed stocks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Challenger Ltd. (ASX: CGF) and Navarre Minerals Ltd. (ASX: NML) for the next 2-4 weeks’ duration: -
Challenger Ltd.
Challenger Ltd. (ASX: CGF) is an investment management firm that provides retirement services to clients by investing in the global equity markets.
Below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
On the weekly chart, CGF stock price broke its downward sloping trend line by an upside and the prices are sustaining above the breakout trend line from the past two weeks. Now the stock is heading towards its next resistance level at AUD 7.700 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 7.700 level supported by volumes may extend buying in the stock till AUD 9.150 level.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is hovering at ~62.28 level indicating positive price momentum. Moreover, the CMP is trading above its 21-period and 50-period SMA which is also supporting a bullish stance. Volume analysis is showing a positive signal for the stock prices.
Financial Summary:
Summary of the Key Financial Metrics for the past four years for Challenger Ltd. is as follows:
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Challenger Ltd. is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. Investment decisions should be made depending on an investor’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical indicator analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:
Navarre Minerals Ltd.
Navarre Minerals Ltd. (ASX: NML) is an Australian based gold exploration and mining company. The company is engaged in exploring minerals in Victoria, Australia. Below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
On the weekly chart, NML stock price broke its downward sloping trend line by an upside and the prices are sustaining above the breakout level from the past week. Now, the prices are heading towards the next resistance levels that appear to be at AUD 0.110 and AUD 0.124, and the stock may test that level in the short term (2-4 weeks).
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, the momentum indicator RSI (14-period) is trading at ~54.86 levels indicating bullish momentum. Prices are also trading above the 21-period which also support the bullish stance. However, the prices are trading below their 50-period SMA acting as an immediate resistance level. Volume analysis is increasing along with prices that are also showing a positive sign for the stock.
Financial Summary:
Summary of the Key Financial Metrics for the past four years for Navarre Minerals Ltd. is as follows:
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Navarre Minerals Ltd. is looking technically well-placed on the chart and we have a ‘Speculative Buy’ rating on the stock. Investment decisions should be made depending on an investor’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical indicator analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:
Upcoming Major Global Economic Events
Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the ASX All-Ordinaries Index and listed stocks’ prices:
Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within a short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the technical analysis has been achieved and is subject to the factors discussed above.
Note 2: How to Read the Charts?
The Green colour line reflects the 21-period moving average while the red line indicates the 50-period moving average. SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume and we consider stocks with greater than or equal to 500,000 volumes as more liquid. Liquidity in stocks helps in easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point.
A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 50% of the Target 1.
The reference date for all price data, volumes, technical indicators, support, and resistance levels is February 21, 2022. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
AUD: Australian Dollar
RSI: Relative Strength Index
Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.
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