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

Last week, ASX All-Ordinaries Index (.AORD) managed to give a positive closing amid high volatility in the global indices. AORD settled at 6943.0 with a marginal increase of ~0.03 percent for the week ending March 05, 2021. All Ordinary Index prices were consolidating in the range between 6923-7068 level last week.

The current market ambiguity sets over the mixed data events released last week. Notably, Australian economy grew by 3.1% in December quarter 2020 reflecting an overall recovery due to ease in COVID-19 related restrictions, according to the data published by Australian Bureau of Statistics (ABS). However, the total number of dwellings approved fell sharply in January 2021 by 19.4% to 15,926 from 19,537 dwellings approved in December 2020, according to the data provided ABS.

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 is getting an immediate resistance at 7290 level on a weekly chart that is near the index's recent high level.

Prices are moving steadily upward, and the index may test its 52-week high in the coming weeks considering improving Australian GDP and growing employment rate. The upcoming events that may impact the market sentiments include an update on NAB Business Confidence data, Westpac Consumer Sentiments data, and MI Inflation Expectations data released monthly. 

Global Markets Wrap-Up 

Wall Street recovered from its sharp losses in the latter half last week. S&P 500 settled at 3841.94 with an overall gain of ~0.80 percent while NASDAQ Composite Index settled at 12,920.15 with an overall loss of ~2.06 percent for the week ending March 05, 2021.

The US weekly claims for jobless benefits increased last week to 745,000 from 736,000 the prior week. However, the jobs data for the non-farm payrolls increased by 379,000 in February 2021 which supported the market sentiment in the latter half of week partially offsetting the impact of higher jobless claims 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 Home Consortium Ltd. (ASX: HMC) and Westgold Resources Ltd. (ASX: WGX) for the next 2-4 weeks duration.

Home Consortium Ltd. 

Home Consortium Limited (ASX: HMC) is a property company focused on ownership, development, and management. The Company is mainly focused on building a network of operating retail and services centres. Below are the key price indicators for the stock: -

Price Action Analysis (on the Weekly Chart)

HMC’s prices are currently trading above upward sloping trendline support of AUD 3.58 level and hovering around the horizontal trendline. The next resistance level appears to be at AUD 4.40 and the stock will achieve this in the next 2-4 weeks’ time frame.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~52 levels, indicating a positive trend for the stock. The CMP is trading below 21-period SMA which are acting as an immediate resistance. However, CMP is trading above 50-period SMA which stands supportive to the stock prices.

Financial Summary: 

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

General Recommendation:

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

Westgold Resources Ltd. 

Westgold Resources Limited (ASX: WGX) is a minerals exploration company primarily engaged in operating gold mines in Australia. The Company’s projects include Central Murchison Gold Project (CMGP), Fortnum Gold Project (FGP), Tuckabianna Project, South Kalgoorlie Operations (SKO) and Rover Project. Below are the key price indicators for the stock: -

Price Action Analysis (on the Weekly Chart)

WGX’s prices currently taking continuous support from rising trendline at AUD 1.85 level and consolidating near the lower band of falling channel pattern. The next resistance level appears to be at AUD 2.40 and prices should test that level in the given time frame.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~40 levels indicating a neutral trend for the prices. The increasing volume trend along with an increase in the stock’s price action further indicates the bullish movement in prices. The CMP is below the 21-period SMA and 50-period SMA, which are acting as an immediate resistance for the stock prices.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Westgold Resources 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 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 March 08, 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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