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

Last week, ASX All-Ordinaries Index (.AORD) continued its upward momentum and settled at 6886.4 with a marginal gain of ~0.30 percent for the week ending December 11, 2020. Prices are moving steadily upward and may test its 52-weeks’ high in the coming weeks taking positive cues from Australian residential property price index data and Westpac consumer sentiment.

According to the Australian Bureau of Statistics (ABS), Australia’s residential property price index of eight capital cities (HPI, quarter on quarter) showed an improving trend as it surged up to 0.8% in the September 2020 quarter compared to -1.8% in the June quarter due to lesser COVID restrictions in most parts of the country. Markets also took support from the recent Westpac consumer sentiment which has reached its highest level in 10-years since October 2010. The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 4.1% to 112 in December 2020 from 107.7 in November 2020. As per the analysis of the technical indicators, prices are reflecting a golden positive crossover between the 21-period SMA and 50-period SMA indicating a bullish trend. The index is getting an immediate resistance at 7277.8 level on a weekly chart that is near to the index's recent high level.

Global Markets Wrap-Up 

Wall Street witnessed a break in its upside rally past week. S&P 500 settled at 3663.45 with an overall loss of ~0.96 percent on weekly basis while Dow Jones Industrial Average settled at 30046.37 with an overall loss of ~0.57 percent weekly for the week ending December 11, 2020. Markets felt pressure at higher levels due to a surge in COVID-19 cases in the US, thereby threatening the economic recovery. The US has approved the first emergency use authorization (EUA) for the COVID-19 vaccine. The US Food and Drug Administration’s (FDA) approved the Pfizer Inc. (NYSE: PFE)- BioNTech (NASDAQ: BNTX) vaccine on December 12, 2020. The US markets reacted to the data of US claims for jobless benefits that surged to 853,000 from 712,000 the prior week which is the highest number of initial claims filed since September 2020, according to the U.S Department of Labour. The upcoming events that may impact the market sentiments include monthly retail sales data followed by the US unemployment claims data and the CB leading index monthly data.

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 stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for National Storage REIT (ASX: NSR) and Sigma Healthcare Ltd (ASX: SIG) for the next 2-4 weeks duration.

National Storage REIT. 

National Storage REIT (ASX: NSR) is one of the leading self-storage providers in Australia and New Zealand. The company provides self-storage, business storage, climate-controlled wine storage, vehicle storage, vehicle and trailer hire, packaging, insurance, logistics, and other value-added services to its clients. The company is headquartered in Brisbane, Australia.

Price Action Analysis (on the Weekly Chart)

NSR’s prices broke the downward trend line resistance of AUD 1.910 by upside on the weekly charts on November 30, 2020, and for the last 2 weeks, prices are sustaining above the breakout level. Now the next important resistance level appears to be at AUD 2.240 and in the short-term (2-4 weeks), the prices may test that level. Any further breakout above the AUD 2.240 accompanied by higher volumes may extend buying in the stock. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~56 levels, indicating a positive trend in the stock. The volume appears to be supportive of the stock’s price action and indicates the bullish trend. The CMP is above the 21-period and 50-period SMA which indicates prices are trading in an upward trajectory.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for National Storage REIT is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that National Storage REIT is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. Summary of our recommendation is as follows:

Sigma Healthcare Ltd. 

Sigma Healthcare Ltd (ASX: SIG) is an ASX-listed company which is engaged in pharmacy wholesale and distribution business. The company has a pharmacy network in Australia with 1200 branded and independent stores. Sigma Healthcare has been also expanding its presence in the hospital pharmacy services and other healthcare services.

Price Action Analysis (on the Weekly Chart)

SIG’s prices are trading in an upward channel and recently prices took the support of the lower band of the channel and reversed upside. Now the next important resistance level appears to be at AUD 0.705 and in the short-term (2-4 weeks), the prices may test that level. Any further breakout above the AUD 0.705 accompanied by higher volumes may extend buying in the stock. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~51 levels indicating a bullish momentum in the prices. The supportive volume trend along with an increase in the stock’s price action further indicates the bullish trend. The CMP is above the 21-period and 50-period SMA, further providing strength to the prices.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Sigma Healthcare ltd is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. 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 risks, currency risks, and social and political instability risks etc.

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.

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.

Trailing Stop-Loss 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 December 14, 2020.

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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