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

Last week, ASX All-Ordinaries Index (.AORD) took a downside correction and settled at 6850.60 with a marginal decline of ~0.96 percent for the short trading week ending December 31^st, 2020. Dull movement witnessed due to lesser volumes post long Christmas weekend and short trading week due to New Year weekend. 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.

Prices are steadily moving in the positive direction and the index may test its 52-weeks high in the coming weeks taking positive cues from Australia’s growing employment rate and the Conference Board Leading Economic Index (LEI) data. The events which may impact the market sentiments in the upcoming weeks include ANZ Job Advertisements data, month-on-month Building Approvals, and Australian trade balance.

Global Markets Wrap-Up

After a long holiday Christmas weekend, markets opened for yet another short trading week. Wall Street managed upside gains during the last week of the year 2020. S&P 500 settled at 3756.07 with an overall weekly gain of ~1.43 percent while Dow Jones Industrial Average settled at 30606.48 with an overall weekly gain of ~1.35 percent for the trading week ending December 31^st, 2020. As we exit 2020 which turned out to be a boon for bullish investors, we are now heading towards 2021 with neutral to positive sentiments.

The US markets have reacted to the data released by the US Department of Labour for the US claims for jobless benefits that decreased to 787,000 from 806,000 the prior week. The upcoming events that may impact the market sentiments include OPEC Meeting, unemployment claims data, and Non-Farm employment change.

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 Genex Power Ltd. (ASX: GNX) and Splitit Ltd. (ASX: SPT) for the next 2-4 weeks duration.

Genex Power Ltd.

Genex Power Limited (ASX: GEN) is a power generation development company that focuses on the generation of clean energy and storage solutions. It is Australia’s one of the leading renewable energy and storage companies.

Price Action Analysis (on the Weekly Chart)

GNX prices took the support of the downward trend line at AUD 0.170 on November 25, 2020, and since then the prices are sustaining above the support level. Prices recently started to move upside after a consolidation phase of almost 3 months and in the short-term, we can expect further upside movement. The next important resistance level appears to be at AUD 0.280 and any breakout above AUD 0.280 coupled with higher volumes may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~62 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 Genex Power Ltd is as follows:

General Recommendation:

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

Splitit Ltd.

Splitit Ltd (ASX: SPT) is a technology company that offers payment solutions. It enables purchasing with an existing debit or credit card using interest-free monthly payments, without any additional registrations or applications. It serves in more than 20 countries to approximately 800 merchants.

Price Action Analysis (on the Weekly Chart)

SPT’s prices broke the downward trendline resistance last week and since then prices are sustaining above the breakout level of AUD 1.24. Prices are currently picking up the momentum. Now the next important resistance level appears to be at AUD 1.72 in the short-term (2-4 weeks),

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~52 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 below the 21-period SMA which is acting as an immediate resistance. However, CMP is trading above 50-period SMA, further providing strength to the prices.

Financial Summary:

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

General Recommendation:

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

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 January 04, 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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