ASX All Ordinaries Index (.AORD) Market Round-Up
Last week, ASX All-Ordinaries Index (.AORD) witnessed fourth straight weekly decline amid decline in US indexes. .AORD settled at ~7307.70 with a fall of 2.14% for the week ending May 13, 2022. The domestic markets declined amid weak Westpac Consumer Sentiment data. Notably, The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 5.6% to 90.4 in May 2022 from 95.8 in April 2022 amid rising cost of living pressures and rising interest rates.
Meanwhile, the overall ASX index is trading in a broad range with a negative bias. As per the technical indicators, the prices traded below its 21-period SMA and 50-period SMA and finding its next resistance level at 7630.55. The upcoming macro events that may impact the market sentiments include an update on the US Retail Sales, Australian Wage Price Index, Australian Employment change data, and Unemployment Claims released weekly.
Global Markets Wrap-Up
Wall Street indices continues to trade in a weak tone from the last six weeks amid global economic slowdown. Notably, S&P 500 settled at 4023.89 with a decrease of ~2.41% while NASDAQ Composite Index also declined ~2.79% to reach 11,805.00 for the week ending May 13, 2022. Meanwhile, the US indices declined last week due to increase in the US unemployment claims data. The seasonally adjusted initial US unemployment claims data published by the US Department of Labor, increased by 1k to 203k for the week ending 07th May 2022 against the revised unemployment claims at 202k 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 NIB Holdings Ltd. (ASX: NHF) and Incannex Healthcare Ltd. (ASX: IHL) for the next 2-4 weeks’ duration: -
NIB Holdings Ltd.
NIB Holdings Limited (ASX: NHF) is an Australia-based insurance company that operates as private health and medical insurer. Below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
On the weekly chart, NHF stock price broke the symmetrical triangle pattern by upside and the prices are sustaining above the breakout level from the past several weeks. Now the stock is heading towards its next resistance level at AUD 8.05 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 8.05 level supported by volumes may extend buying in the stock till AUD 8.650 level.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is hovering at ~58.40 level indicating positive price momentum. The CMP is trading above its 21-period and 50-period SMA that indicates bullishness in the stock prices. Volume analysis is showing positive signal for the stock prices.
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that NIB Holdings 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:
Incannex Healthcare Ltd.
Incannex Healthcare Limited (ASX: IHL) is an Australia-based pharmaceutical company engaged in clinical-stage development. Below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
On the weekly chart, IHL stock price broke its downward sloping trend line by an upside and the prices are sustaining above the breakout level from the past one week. Now, the prices are heading towards its next resistance levels which appears to be at AUD 0.530 and AUD 0.580, and the stock may test these levels in the short term (2-4 weeks).
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, the momentum indicator RSI (14-period) moved up from oversold region to ~47.92 level indicating bullish momentum. Prices are also trading above its 50-period SMA that also support the bullish stance. However, the price is trading below its 21-period SMA acting as an immediate resistance. Volume analysis is showing positive sign for the stock.
General Recommendation:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Incannex Healthcare 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 May 16, 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.
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