ASX All Ordinaries Index (.AORD) Market Round-Up
Last week, ASX All-Ordinaries Index (.AORD) showed some promising upside move and settled at 7024.20 with a strong gain of ~2.53 percent for the week ending January 08, 2021. According to the data provided by Australian Bureau of Statistics (ABS), the total number of dwellings approved increased in November 2020 by 2.6% to 17,205 from 16,775 dwellings approved in October 2020. Australian index also took cues from rising global indices such as S&P 500 and Dow Jones Industrial Averages which are making consecutive new all-time highs. As per the analysis of the technical indicators, prices are reflecting a golden positive crossover between the 21-period SMA and 50-period SMA indicating a bullish trend. The index is getting an immediate resistance at 7277.8 level on a weekly chart that is near to the index's recent high level.
Prices are moving steadily upward and may test its 52-week high in the coming weeks taking positive cues from rising building approvals data and Australia’s growing employment rate. The upcoming events in the coming weeks include US unemployment claims, Natural Gas storage data, and Retail sales data released on monthly basis.
Global Markets Wrap-Up
Wall Street started its first week of the year on a positive tone. S&P 500 settled at 3824.68 with an overall weekly gain of ~1.83 percent while Dow Jones Industrial Average settled at 31097.97 with an overall weekly gain of ~1.61 percent for the week ending January 8, 2021.
The markets are now looking for additional fiscal stimulus as elected President Mr. Joe Biden indicated further economic stimulus roll-out. The US markets have reacted to the data released by the US Department of Labour for the US claims for jobless benefits that decreased to 787,000 from 790,000 the prior week. The upcoming events that may impact the market sentiments include Consumer Price Index data released by US Bureau of Statistics, unemployment claims data, and US Monthly Retail sales data published by US Census Bureau.
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 stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Ridley Corporation Ltd. (ASX: RIC) and Senex Energy Ltd. (ASX: SXY) for the next 2-4 weeks duration.
Ridley Corporation Ltd.
Ridley Corporation Limited (ASX: RIC) is a food processing company engaged in animal nutrition solutions and operates in two divisions the Agri products segment and the property segment. Its different brands are Rumevite, Barastoc, Primo, and Cobber.
Price Action Analysis (on the Weekly Chart)
RIC's prices are consolidating above the downward trend breakout from the past 2 months and broke the major resistance level of AUD 0.957 on the upper side on January 11, 2020. Recently prices started to catch the upside movement and may test an important resistance level of AUD 1.140 in the 2-4 weeks duration.
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Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI is trading at ~62 levels, indicating a positive trend in the stock. The volume appears to be supportive of the stock’s price action and indicates the bullish trend. The CMP is above the 21-period and 50-period SMA which indicates prices are trading in an upward trajectory.
Financial Summary:
Summary of the Key Financial Metrics for the past four years for Ridley Corporation Ltd. is as follows:
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Ridley Corporation 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. Summary of our recommendation is as follows:
Senex Energy Ltd.
Senex Energy Limited (ASX: SXY) is an ASX-listed energy company engaged in oil and gas exploration and production. It has over 10 Senex operated oil fields and produces more than one million barrels of oil per year. Its segments include Surat/Bowen basin and Cooper/Eromanga Basin.
Price Action Analysis (on the Weekly Chart)
SXY's prices consolidating on the weekly chart from the past 2 months and recently started to move upside after taking the support of the downward trend line at AUD 0.295. Now the next important resistance level appears to be at AUD 0.425 and prices may test level in the 2-4 weeks duration.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI is trading at ~59 levels indicating a bullish momentum in the prices. The supportive volume trend along with an increase in the stock’s price action further indicates the bullish trend. The CMP is above the 21-period SMA and 50-period SMA, further providing strength to the prices.
Financial Summary:
Summary of the Key Financial Metrics for the past four years for Senex Energy Ltd. is as follows:
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Senex Energy 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 investors 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 risks, 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 on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.
Note: 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.
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 January 11, 2021.
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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