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

After making a new all-time high of ~7656.30, ASX All-Ordinaries Index (.AORD) settled at 7630.70 with a gain of ~1.13 percent for the week ending July 16, 2021. Rising Covid-19 cases in Australia have kept the market range bound. However, lower week-on-week US unemployment data and decent AU employment numbers provided some support. According to the Australian Bureau of Statistics (ABS), the total number of employed people increased in June to 13,154k slightly up from 13,125k employed in May resulting in the drop in unemployment rate to 4.9% in June 2021 versus 5.1% prior month.

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 Monetary Policy Meeting Minutes, Australian Retail Sales data, NAB Quarterly Business Confidence and US Unemployment Claims released weekly.

Global Markets Wrap-Up 

Wall Street indices lost its consecutive three weeks' gaining momentum as S&P 500 slipped from record levels and settled at 4327.16 with a weekly loss of ~0.97% while NASDAQ Composite Index also closed in negative zone and settled at 14,427.24 with a loss of ~1.87% for the week ending July 16, 2021. Markets closed in red despite of decent US employment claims numbers published by the US Bureau of Labor Statistics. According to the weekly data, the seasonally adjusted initial US unemployment claims data declined by 26,000 to 360,000 for the week ending 10^th July 2021 against the initial claims at 386,000 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 Mount Gibson Iron Ltd. (ASX: MGX) and Bubs Australia Ltd. (ASX: BUB) for the next 2-4 weeks’ duration: -

Mount Gibson Iron Ltd. 

Mount Gibson Iron Limited (ASX: MGX) is an iron ore product producer company. The Company's primary activities include mining, exploration, development, and shipment of iron ore. The summary of stock’s key price indicators is provided below:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, MGX stock price broke the downward sloping trend line resistance at AUD 0.93 level on July 09, 2021. Since the breakout, prices are sustaining above the downward sloping trend line. Now the next immediate resistance level appears at AUD 1.090 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 1.090 level supported by volume may extend buying in the stock till AUD 1.200 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is hovering at ~56.40 level indicating positive price momentum. The CMP is trading above the 21 and 50 period SMA which is positive for the stock prices. Volume analysis are also showing positive signs.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for Mount Gibson Iron Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Mount Gibson Iron Ltd. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating as the stock price is trading near 52-week high levels. 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:

Bubs Australia Ltd. 

Bubs Australia Limited (ASX: BUB) is a food company that deals in the infant food category. It is engaged in the production and sale of organic infant food and infant milk formulas. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, BUB stock price witnessed a breakout of the falling channel pattern at AUD 0.48 level (on July 08, 2021). Stock prices are also trading above the breakout level further supporting bullish stance. Now, the next resistance level appears to be at AUD 0.60, 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 ~50.28 levels from an oversold region indicating positive price momentum. The CMP is trading below 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 Bubs Australia Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Bubs Australia 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 19, 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.

---

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 do not hold interests in any of the securities or other financial products covered on the Kalkine website.