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

Last week, ASX All-Ordinaries Index (.AORD) continued its long bull run and made its new record high of 7,548.20 and settled near the record high at 7543.30 with a gain of ~1.61 percent for the week ending June 04, 2021. ASX indices indicated strong upside movement last week taking cues from the latest Australian April retail sales data (seasonally adjusted) which posted 1.1% gain to AUD31028.2 million compared to AUD30699.6 million posted in March 2021, according to Australian Bureau of Statistics (ABS).

Meanwhile, .AORD started this week on a positive tone and reached 7561.20, but was unable to maintain its positive movement and settled in red in the first day of the week. Overall domestic markets are trading in a bullish tone mainly led by energy, utilities and technology stocks which are currently among the trending sectors.

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 recently broke all-time high levels of 7289.7 on a weekly chart and prices might be heading towards its next resistance level of 7714. The upcoming macro events that may impact the market sentiments include an update on NAB’s Australia Business Confidence, Westpac Consumer Sentiment, and US Unemployment Claims released weekly. 

Global Markets Wrap-Up 

Wall Street traded in a positive zone last week with S&P 500 closing near its all-time high levels and settled at 4229.89 with a gain of ~0.61 percent while NASDAQ Composite Index settled at 13,814.49 with a gain of ~0.48 percent for the week ending June 04, 2021.

US Indexes surged due to the positive total non-farm payroll employment data which rose by 559,000 in May 2021 while the US unemployment rate declined by 0.3 percent to 5.8 percent, according to the US Bureau of Labor Statistics. Besides, the US weekly unemployment claims data further declined last week to 385,000 from 405,000 the prior week which provide decisive support to the markets.

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 stocks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Aurizon Holdings Ltd. (ASX: AZJ) and Australian Strategic Materials (Holdings) Ltd. (ASX: ASM) for the next 2-4 weeks’ duration: -

Aurizon Holdings Ltd. 

Aurizon Holdings Ltd (ASX: AZJ) operates as a rail-based transport business. The Company’s core business segments include Coal, Bulk and Network. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

On the weekly chart, AZJ stock price broke out the downward sloping trend line resistance at AUD 3.66 level on May 31, 2021. RSI (14) is showing positive divergence with prices indicates bullishness. Now the next immediate resistance level appears at AUD 4.42 and in the short-term (2-4 weeks), prices may test that level. An upside above AUD 4.42 level accompanied by volume may extend buying in the stock till AUD 5.08 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~46.97 levels from near an oversold region indicating the positive price momentum. The CMP is trading below 21 and 50 period SMA which is acting as a resistance for the stock prices. Volume analysis are also showing positive signs.

Financial Summary: 

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

General Recommendation:

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

Australian Strategic Materials (Holdings) Ltd. 

Australian Strategic Materials (Holdings) Ltd (ASX: ASM) is a materials technology company. The Company is focused on producing specialty metals and oxides from the Dubbo Project. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, ASM stock price witnessed a breakout of the falling channel pattern at AUD 5.29 level on June 04, 2021. Prices are also trading above its 21-period SMA that might be supportive for the current price action. Now the next immediate resistance levels appear at AUD 6.86 and AUD 7.02 and prices may test the level in the coming period.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~63.03 levels from moderate levels indicating positive price momentum. The CMP is trading above the 21 period. Volumes are also showing increasing trend along with increase in prices that further indicates active participation in the stock.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Australian Strategic Materials (Holdings) Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Australian Strategic Materials (Holdings) 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.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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 June 07, 2021. The reference data in this report has been partly sourced from REFINITIV. 

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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