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

Last week, ASX All-Ordinaries Index (.AORD) made a new all-time high of 7419.80 but was unable to close in green and settled at 7239.40 with a loss of ~1.17 percent for the week ending May 14, 2021. ASX indices witnessed selling from higher levels amid global sell-off in stocks due to rise in the US inflation rate. Meanwhile, AORD started this week on a bullish tone due to rebound in prices from lower levels in US indices on the back of lower US unemployment claims data. The ASX indices are also getting support from the mining stocks especially Australian gold miners since the past couple of months driven by the surging yellow metal prices.

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 all-time high levels 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 Monetary Policy Meeting Minutes, Employment Change and Retail Sales released monthly.

Global Markets Wrap-Up 

S&P 500 witnessed heavy sell-off from higher levels last week and settled at 4173.85 with a loss of ~1.39%. NASDAQ Composite Index also declined ~2.34% to reach at 13,429.98 for the week ending May 14, 2021. Markets were largely impacted by the much-anticipated rise in the US inflation rate which moved up to 4.2% in the past one year, the largest 12-month rise since 4.9% increase reported in September 2008 before the seasonal adjustment. Consumer Price Index for all urban consumers also surged 0.8 percent in April compared to 0.6% increase in March 2021.

However, markets took positive cues lately driven by the US weekly unemployment claims data which declined last week to 473,000 from 507,000 the prior week as published by the US Labor Department.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 Genworth Mortgage Insurance Australia Ltd. (ASX: GMA) and Estia Health Ltd. (ASX: EHE) for the next 2-4 weeks duration:-

Genworth Mortgage Insurance Australia Ltd. 

Genworth Mortgage Insurance Australia Limited (ASX: GMA) is an insurance company that deals in lenders mortgage insurance (LMI). The Company is involved in underwriting LMI through flow and portfolio channels.

The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

GMA prices broke the downward sloping trend line and sustaining above the breakout level from the last 15 weeks. Prices have recently taken sharp upside correction from the 21-period SMA and, the stock has witnessed 21 period SMA golden crossover which further might provide support to the prices. Now the next immediate resistance level appears at AUD 3.19 and in the short-term (2-4 weeks), prices may test that level. An upside move above AUD 3.19 level accompanied by volumes may extend buying in the stock till AUD 3.55 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is hovering at ~56.19 levels indicating a positive trend for the stock. The CMP is trading above 21 and 50 period SMA which is supportive for the stock prices. Volume analysis are also supporting the current price action.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for Genworth Mortgage Insurance Australia Ltd. is as follows:

General Recommendation:

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

Estia Health Ltd. 

Estia Health Ltd (ASX: EHE) offers residential aged care homes in Australia. It is engaged in various general activities, such as reading, gardening, parties, movies, music, cultural celebrations, art sessions, etc. and provides clinical care services, such as pain management, medical services, physiotherapy, pharmacy, optometry, podiatry, dental, dementia care, and personal care. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

EHE prices are trading above the downward sloping trend line from the last few weeks. Stock prices are witnessing golden crossover of 21 period SMA over 50 period SMA which further indicates the existing price trend is bullish. Now the next immediate resistance levels appear at AUD 3.15 and AUD 3.65 and prices may test the level in the coming period.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~76.26 levels indicating a positive price momentum to the stock. The CMP is trading above the 21 period and 50 period SMA which indicates the positive trend for the stock. Volumes are showing increasing trend which further support the bullish price action.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Estia Health 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 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 May 17, 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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