ThinkTechnical 26 June

The theme for today's ThinkTechnical is 'haves and have-nots'. Clearly, there are/have been winners and losers out of the Coronavirus pandemic. Winners have generally come from the gold sector, the technology sector, and the materials sector. Losers have typically come from the financials, property trusts, and energy. Whilst segments of the discretionary sector, mainly those exposed to online consumer spending have done well, travel-related stocks have been savaged. 


 
The outperformance of the materials sector has been a particular surprise. Despite fears of a global economic slowdown, tight supply and Chinese economic stimulus focussed on increasing infrastructure construction have caused the price of commodities like copper and iron ore to rise.
 
Less surprisingly, gold prices have risen. Gold is often seen as a hedge against uncertainty, and more importantly, against money printing - and there has been plenty of each of late!
 
Let's now take a look at some of the companies in the outperforming sectors whose charts look particularly interesting at the moment (and one underperformer whose outlook appears very dicey indeed). But, before we do, we'll take a quick look at the major indices, and given the Gold sector is top of the pops at the moment - at Spot Gold.
 

 
The S&P500 rallied over 47% from the March lows to the highs set early June. We're now sitting roughly 8% off those highs.

From a technical perspective, the rally appears likely to be well supported around current levels as we see the confluence of both static support from the 24 April high of 2954, and dynamic support from short and medium term moving averages around 3000-3100.

The static support offered by the April high is further reinforced by the medium term trough set at the 15 June low of 2965. As long as that 2954-2965 band holds, prices should continue to grind higher into static resistance from the 8 June high of 3233.

A confident close above this level is required in order to challenge static resistance from the all-time high set on 19 Feb at 3393.
 

 
Australian shares have enjoyed a 40% rally from the March lows to the June peak. At yesterday's low we were 6% off the 9 June high of 6199 on the Share Price Futures (SPI).

Unlike the SP500, we did not convincingly move above our long term dynamic resistance posed by the longer term moving averages. It is likely that whilst the ASX200 will be supported by short and medium term buying in the 5600-5800 zone, we will mark time until the 9 June high can be broken with confidence.
 

Spot Gold appears to be making the first foray out of its substantial congestion zone between $1650 and $1750. This zone should now offer significant support on any pullbacks.

The medium and longer term uptrends are well defined, and the dynamic support zone is near enough to suggest that the risk reward on Spot Gold is attractive. The upside is not totally clear however, as there are two significant static resistance points (albeit from the distant past) to contend with. So, watch out for potential stalls in a continued move higher at the October 2012 high of 1795 and the Sept 2011 high of 1920.
 

Unfortunately, one of the 'have nots', FLT has been hammered by the market as their business has effectively ground to a halt due to Coronavirus shutdowns and travel restrictions. Assuming the world gets back to normal eventually, and FLT is still around to see it…it's probably going to represent a buying opportunity some time? Right?

Well the technical suggest 'not just yet'. The medium term peak set on 9 Jun at 17.89 looks to dominate the chart in the near term. The short-medium term moving averages indicate dynamic resistance around $13.50, and the recent downturn suggests prices may move back to the 19 March low of $8.68.

If this level of static support cannot hold, far lower prices beckon, as there is little other support to hold on to below it. 
 

One of the 'haves', RMS has enjoyed investors renewed focus on the gold sector of late. The gold producer yesterday reported better than expected performance from their WA production centres in the June quarter.

Looking at the technicals for RMS, the price action is well supported around the $1.85 breakout point from 16 June. As is often the case however, gaps are destined to be filled, and the recent pullback may extend into the $1.85-$1.95 zone. This area should see renewed buying as it coincides with both static and dynamic (from the short term moving averages) support.

As this recent move has taken the RMS share price beyond its all-time highs, there is no overhead resistance. This means an entry within the support zone identified above offers an attractive reward to risk profile.
 

The other of the 'haves' we'll review today, Accent Group is a local retailer and distributor of performance and lifestyle footwear. Despite having a significant bricks-and-mortar exposure, it is the company's highly sought after brands (by its younger clientele!) and e-commerce expertise that have enabled it to actually increase sales by 10% for the financial year.
 
Looking at the technicals for AX1, the price action is in a well defined short term and medium term uptrend since the March lows. Yesterday's break of the medium term peak set at $1.48 on 9 June should allow for a further rise to the 21 Feb high of $2.20.

The price will likely be well supported by the moving averages and the 9 June high around the $1.45-$1.50 level. If one can buy in this zone, the support/resistance set up once again makes for an attractive reward to risk profile.