ThinkTechnical 15 July


A topical look at technical analysis factors for a number of key markets, and ASX stocks of interest for 14 July.



In today's edition of ThinkTechnical, we'll take a broader, "top-down" look at the Australian stock market.

We'll start by looking at the overall S&P ASX200 (by ways of the Share Price Index futures contract), and then at three strongest, and two weakest ASX200 sectors listed in order of relative 3 month performance compared to the benchmark.

By looking at outperformance and underperformance, we can get an idea of which sectors the fund managers are rotating into, and out of.

There are a number of practical applications of sectoral analysis.

One strategy commonly used by investors is to next drill down into the strongest sectors to identify buying opportunities, and into the weakest sectors to identify selling opportunities.

Alternatively, some investors prefer to be contrarian. They may instead choose to target the best stocks in the weakest sectors as potential winners if those sectors return to favour.
 

ASX200 Share Price Index (SPI)

2020-07-15_SPI.png

The SPI continues to be squeezed into an ever tighter trading range defined by long term dynamic resistance from the 144-233 EMAs and short term dynamic support from the 21-34EMAs.

The price action shows falling peaks from the 9 June high of 6199, and the 3 July high of 6082, vs. rising troughs from the 15 June low of 5710, the 26 June low of 5724, and the 10 July low of 5857.

To continue the short term uptrend, the SPI must breach and close above 6082. Static resistance will then be encountered at 6199, and then also at the 16 August 2019 low of 6303. Past this, a more open target to the 20 Feb high of 7148 beckons.

However, if the SPI breaches 5857, static support will be encountered at 5724, and then at the 'last stand' for the short term uptrend at 5710.

Below this, there is every chance the SPI will have held its long term downtrend, and therefore it will likely target the 17 April high of 5566.

In the meantime, traders may wish to buy in the short term dynamic support zones between 5873-5915 with stops set below this level.
 

STRONGEST 

Information Technology Sector (XIJ)
2020-07-15_XIJ.png

The XIJ has outperformed the ASX200 by 7.7% over 1 month, and 23% over 3 months.

XIJ is in a well-defined short term uptrend as evidenced by correct order, and rising 21-34 EMAs, and a well-defined long term uptrend as evidenced by correct order and rising 144-233 EMAs.

On 14 July it touched the ST dynamic support zone as defined by the 21-34 EMAs. This also coincides with static support from the 13 Feb high of 1613 and the 24 June high of 1617.

Static resistance will likely be encountered at the 10 July high of 1741.

Bias: Long bias. Traders may wish to buy at the static, and short term dynamic support zones.
 
Gold Sector (XGD)
2020-07-15_XGD-(1).png

The XGD has outperformed the ASX200 by 5.9% over 1 month, and 21% over 3 months.

XGD is in a well-defined short term uptrend as evidenced by correct order, and rising 21-34 EMAs, and a well-defined long term uptrend as evidenced by correct order and rising 144-233 EMAs.

Dynamic support is expected to be encountered at the 21-34 EMAs between 8410-8550. This also coincides with static support from the 26 May high of 8548 and the 14 July low of 8613. Note also, the 8 August 2019 high of 8730 will likely now also offer static support.

Static resistance will likely be encountered at the 9 July high of 9092.

Bias: Long bias. Traders may wish to buy at the static, and short term dynamic support zones.
 
Materials Sector (XMJ)
2020-07-15_XMJ.png

The XMJ has outperformed the ASX200 by 1.2% over 1 month, and 8.3% over 3 months.

XMJ is in a well-defined short term uptrend as evidenced by correct order, and rising 21-34 EMAs. Its long term trend is undefined as evidenced the 144 EMA below the 233 EMA, but both of these are EMAs rising. It is likely these will cross in the near future, and therefore initiate a new long term uptrend.

Today, XMJ appears to be breaking through the static resistance from the 9 June high of 13849. This level will likely now act as static support.

The next level of static resistance will likely be encountered at the 22 January high of 14797. This is a clear and logical short term target.

The price has consistently rebounded higher from the dynamic support zone as defined by the 21-34 EMAs. Moving forward, dynamic support will likely continue to be encountered between 13400-13600. 

Bias: Long bias. Traders may wish to buy at the static, and short term dynamic support zones.
 

WEAKEST

Energy Index (XEJ)
2020-07-15_XEJ.png

The XEJ has underperformed the ASX200 by 4.4% over 1 month, and 7.6% over 3 months.

XEJ is in a well-defined long term downtrend as evidenced by correct order, and declining 144-233 EMAs. Its short term trend is undefined.

The medium term price action is dominated by the long term dynamic resistance zone defined by the 144-233 EMAs between 8310-8900, and the 9 June high of 8483.

Short term static support will likely be encountered at the 29 June low of 7136.

Bias: Neutral/short bias on lack of a clearly defined short term trend. Note, a break above the 7862 may assist in instigating a new short term uptrend.
 
Property Trusts (XPJ)
2020-07-15_XPJ.png

The XPJ has underperformed the ASX200 by 3% over 1 month, and 6.3% over 3 months.

XPJ is in a well-defined long term downtrend as evidenced by correct order, and declining 144-233 EMAs. Its short term trend is undefined.

The medium term price action is dominated by the long term dynamic resistance zone defined by the 144-233 EMAs between 1320-1385, and the 9 June high of 1360.

Short term static support will likely be encountered at the 10 July low of 1195.

Bias: Neutral/short bias on lack of a clearly defined short term trend.



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