ASX All Ordinaries Index (.AORD) Market Round-Up

Last week, ASX All-Ordinaries Index (.AORD) traded in an upward trajectory and settled at record highs that is ~7806.50 with a sharp gain of ~1.86 percent for the week ending August 06, 2021. Notably, Australian indices were able to manage positive weekly close. However, last weeks’ domestic data cues were not encouraging. As per the Australian Bureau of Statistics, the seasonally adjusted estimate for the total number of dwellings approved fell by 6.7% to 18,911 in June 2021 compared to 20,263 approved dwellings a month earlier. 

Meanwhile, .AORD is trading in a rising channel pattern on a weekly chart and prices are trading near the upper band of the pattern. As per the technical indicators, prices are still reflecting a golden positive crossover between the 21-period SMA and 50-period SMA indicating a bullish trend. The index recently broke an all-time high level of 7289.7 level on a weekly chart and prices might head towards its next resistance level of 7979.90 level. The upcoming macro events that may impact the market sentiments include an update on Australian NAB Business Confidence data, Westpac Consumer Sentiment data, Melbourne Institute Inflation expectations and US Unemployment Claims released weekly.

Global Markets Wrap-Up 

Wall Street indices witnessed positive closing last week. Notably, S&P 500 hit its all-time high levels of ~4440.82 and settled at 4436.52 with a weekly gain of ~0.94% while NASDAQ Composite Index settled at 14,835.76 with a gain of ~1.11% for the week ending August 06, 2021. Strong US employment claims published by the US Bureau of Labor Statistics supported the US markets. The seasonally adjusted initial US unemployment claims data decreased by 14k to 385k for the week ending 31^st July 2021 against the initial claims at 399k 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 the 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 Westgold Resources Ltd. (ASX: WGX) and Mader Group Ltd. (ASX: MAD) for the next 2-4 weeks’ duration: -

Westgold Resources Ltd. 

Westgold Resources Limited (ASX: WGX) is a minerals exploration company primarily engaged in operating gold mines in Australia. The Company’s projects include Central Murchison Gold Project (CMGP), Fortnum Gold Project (FGP), Tuckabianna Project, South Kalgoorlie Operations (SKO) and Rover Project. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

On the weekly chart, WGX stock price is recently trying to recover from the major support of an upward sloping trend line. There is a moderate positive RSI divergence with prices which might also lead the prices to the resistance levels. Now the next immediate resistance level appears at AUD 2.080 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 2.080 level supported by volume may extend buying in the stock till AUD 2.320 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is hovering near the oversold zone at ~36.12 level  indicating positive price reversal. The CMP is trading below the 21 period SMA and 50-period SMA which is acting as an immediate resistance for the stock prices. Volume are declining with decrease in prices that further supports our bullish stance.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for Westgold Resources Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Westgold Resources Ltd. is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite on 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.  Summary of our recommendation is as follows:

Mader Group Ltd. 

Mader Group Ltd (ASX: MAD) is a maintenance service company that provides labor based on the specialized contract to maintain heavy mobile equipment in the resource industry. It also provides labor for field support, rail maintenance, fixed plan support, rapid response teams, training and mentoring, diggers, etc. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, MAD stock price witnessed the breakout of a symmetrical triangle pattern on an upside and prices are trading above the breakout level from past three weeks. Now, the prices are heading towards its next resistance level that appears to be at AUD 1.140, 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 has moved up to ~60.98 levels indicating positive price momentum for the stock. The CMP is trading below the 21-period and 50-period SMA that might provide support to the stock prices. Volumes are also indicating positive signs for the stock prices.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Mader Group Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Mader Group Ltd. is looking technically well-placed on the chart and we have a ‘Speculative Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite on 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 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 short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and 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 risk, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation in the ‘Entry Price’ can be considered depending upon the upside potential expected and taking into consideration the Target 1 and trailing stop-loss levels indicated. For example: - An Investor can consider entering the stock at or above a certain range (3%-5%) from the Entry Levels recommended depending upon the potential upside expected and difference from the Target 1 and Trailing-Stop Loss Levels indicated for the stock.

Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the technical analysis has been achieved and 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 trend. 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 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 August 09, 2021. 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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