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

During the first week of January 2022, ASX All-Ordinaries Index (.AORD) witnessed marginal negative weekly closing after a decent rally in the last two weeks of December 2021. .AORD settled at ~7774.40 with a marginal decline of 0.06% for the week ending January 07, 2022. Overall, the ASX markets are trading in a range. Domestic markets might take support from the recent Building approval data. According to the Australian Bureau of Statistics (ABS), the total number of dwellings approved increased in November 2021 by 3.6% to 16,448 from 15,884 dwellings approved in October 2021.    

However, the overall ASX indices are trading with a weak bias after the broad index broke the ascending channel pattern by downside on a weekly chart which may indicate further downside potential in the long run. As per the technical indicators, prices are currently trading above its 21-period SMA and 50-period SMA and finding its next resistance level at 8182.46. The upcoming macro events that may impact the market sentiments include an update on Australian Retail Sales data, US Consumer price index, US Unemployment Claims and US Industrial Production data released Monthly.

Global Markets Wrap-Up 

Wall Street indices declined last week after the markets recovered in the latter weeks of December 2021. S&P 500 settled at 4677.03 with a decline of ~1.87% while NASDAQ Composite Index also tanked heavily with a decline of ~4.53% at 14,935.90 for the week ending January 07, 2022. Meanwhile, the US indices decreased last week amid increase in the US unemployment claims data. The seasonally adjusted initial US unemployment claims data published by the US Department of Labor, increased by 7k to 207k for the week ending 01^st January 2022 against the revised unemployment claims at 200k 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 Deterra Royalties Ltd. (ASX: DRR) and Bowen Coking Coal Ltd. (ASX: BCB) for the next 2-4 weeks’ duration: -

Deterra Royalties Ltd. 

Deterra Royalties Ltd. (ASX: DRR) operates in a royalty business model that involves managing and investing a portfolio of royalties across bulk commodities, base metals and battery minerals in Australia. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, DRR stock price broke the horizontal trend line resistance of AUD 4.370 by an upside and the prices are sustaining above the same in the existing week. Now the next immediate resistance level appears at AUD 4.860 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 4.860 level supported by volumes may extend buying in the stock till AUD 5.350 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is hovering at ~59.64 level indicating positive price momentum. The CMP is trading above the 21 period and 50-period SMA that indicates bullish trend for the stock. Volume analysis is showing positive signal for the stock prices.

Financial Summary: 

Summary of the Key Financial Metrics for the past two years for Deterra Royalties Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Deterra Royalties 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 for an 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:

Bowen Coking Coal Ltd. 

Bowen Coking Coal Ltd. (ASX: BCB) is a coking coal exploration company based in Queensland. The company is engaged in advanced exploration and development assets of coking coal. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, BCB stock price broke its crucial horizontal trend line resistance of AUD 0.170 and the prices are sustaining above the breakout level from past two weeks’ that further indicates bullishness. Now, the prices are heading towards its next resistance levels that appears to be at AUD 0.195 and AUD 0.220, 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 ~63.03 levels indicating bullish momentum for the stock. Prices are also trading above its 21-period SMA and 50-period SMA that also seems supportive for an upside movement.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Bowen Coking Coal Ltd. is as follows:               

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Bowen Coking Coal 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 for an 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.

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 January 10, 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.