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

Last week, ASX All-Ordinaries Index (AORD) made new high further signalling the index is trading in a primary upward trend. .AORD settled at record highs at 7670.90 with a gain of ~0.53 percent for the week ending July 23, 2021. Notably, Australian indices are making consecutive peak despite concerns around COVID-19 bounce back. Positive rally in the US indices, and overall strong business conditions in Australia supported the domestic market sentiments. According to the NAB Quarterly Business Survey data, business conditions in Australia rose 12 points to +32 in the quarter ending June 2021. Eventually, business confidence figures dropped slightly by 2 points to +17 from +19 in June quarter 2021.

Meanwhile, .AORD is trading in a rising channel pattern on a weekly chart and prices are showing stiff resistance at 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 be heading towards its next resistance level of 7714 level. The upcoming macro events that may impact the market sentiments include an update on Australian CPI and PPI Quarterly data, US GDP Advance Estimate for 2nd Quarter, and US Unemployment Claims released weekly.

Global Markets Wrap-Up 

Wall Street indices rebounded last week after a weak closing in the prior week as S&P 500 hit its all-time high levels and settled at 4411.79 with a weekly gain of ~1.96% while NASDAQ Composite Index settled at 14,836.99 with a sharp gain of ~2.84% for the week ending July 23, 2021. US markets witnessed an upside rally despite of the weak US unemployment claims numbers. As per the US Bureau of Labor Statistics, the seasonally adjusted initial US unemployment claims data increased by 51k to 419k for the week ending 17^th July 2021 against the initial claims at 368k in the prior week.

Conversely, the US existing home sales data reflected moderate growth. As per the National Association of Realtors, the seasonally adjusted total existing home sales climbed up at an annual rate of 5.86 million in June 2021 up by 22.9% a year earlier.

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 Alpha HPA Ltd. (ASX: A4N) and Damstra Holdings Ltd. (ASX: DTC) for the next 2-4 weeks’ duration: -

Alpha HPA Ltd. 

Alpha HPA Ltd. (ASX: A4N) is an ASX-listed mineral exploration company. The company’s primary focus is to deliver high purity Alumina (HPA). The company has its exploration projects in Indonesia and Australia. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

On the weekly chart, A4N stock price broke out the downward sloping trend line resistance at AUD 0.492 level on July 22, 2021. Since the breakout, prices are sustaining above the downward sloping trend line. Now the next immediate resistance level appears at AUD 0.620 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 0.620 level supported by volume may extend buying in the stock till AUD 0.670 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is hovering at ~52.53 level indicating positive price momentum. The CMP is trading above the 50-period SMA which is positive for the stock prices. However, prices are trading below its 21-period SMA that is acting as an immediate resistance. Volume analysis are also showing increasing trend with increase in prices further supporting our bullish stance for the stock.

Financial Summary: 

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Alpha HPA 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:

Damstra Holdings Ltd. 

Damstra Holdings Limited (ASX: DTC) is a software company that deals in workforce management solutions. The company engaged in the development, implementation, and sell of integrated hardware and Software-as-a-Service (SaaS) solutions. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, DTC stock price witnessed the breakout of a falling trend line resistance at AUD 0.936 level on July 22, 2021, and prices are trading above the trend line level. Now, the prices are heading towards its next resistance level that appears to be at AUD 1.26 and AUD 1.37 levels, and the stock may test that levels 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 ~49.42 levels after the price witnessed positive divergence with RSI that indicates upside reversal in the stock prices. The CMP is trading above the 21-period SMA that might provide support to the stock prices. However, prices are trading below 50-period SMA acting as a resistance level for the stock prices. Volumes are giving positive signs for the stock prices.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Damstra Holdings 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 July 26, 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  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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