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

Last week, ASX All-Ordinaries Index (.AORD) made a sharp comeback to upside after a fall prior week and settled at 7112.90 with an increase of ~3.52 percent for the week ending February 05, 2021. The index prices have surged last week over the Australian building approvals data. According to the data provided by Australian Bureau of Statistics (ABS), the total number of dwellings approved soared sharply in December 2020 by 10.9% to 19,537 from 17,614 dwellings approved in November 2020. As per the analysis of 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 to the index's recent high level.

Prices are moving steadily upward and 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 NAB Business Confidence data, Westpac Consumer Sentiment data, and Australian MI Inflation Expectations released on a monthly basis.

Global Markets Wrap-Up 

Wall Street surged sharply last week and witnessed its biggest weekly gains since early November 2020. S&P 500 settled at 3886.83 with an overall weekly gain of ~4.65 percent while Dow Jones Industrial Average settled at 31,148.24 with an overall weekly gain of ~3.89 percent for the week ending February 05, 2021.

Market reacted positively over the various employment data from Labor department of US last week. As per the data published by US Labor department, the US claims for jobless benefits decreased last week to 779,000 from 812,000 the prior week. Also, the job growth has returned as the non-farm employment data shows increase in jobs by 49,000 while the unemployment data fell by 0.4 percentage points to 6.3% in January 2021. The events that needs to be considered for the upcoming week are unemployment claims data and consumer price index data published by US labor department monthly.

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 Ansell Ltd. (ASX: ANN) and Paradigm Biopharmaceuticals Ltd. (ASX: PAR) for the next 2-4 weeks duration.

Ansell Ltd 

Ansell Limited (ASX: ANN) is a health care company that deals in medical instruments & supplies. The core revenue segments include Industrial, healthcare, and life science. Its offers products through various brands such as AlphaTec, HyFlex, TouchNTuff, Encore, Gloves, Micro-Touch, and Sandel.

Price Action Analysis (on the Weekly Chart)

ANN's prices sustaining above the upward trend line and broke the resistance level at AUD 36.50 on February 03, 2021 and hovering around the breakout levels. Now the next resistance level appears at AUD 43.17 and in the short term (2-4 weeks), prices may test that level. Any further breakout above the AUD 43.17 accompanied by volume may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~56 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 are indicating the positive trend for the stock.

Financial Summary: 

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

General Recommendation: 

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

Paradigm Biopharmaceuticals Ltd.

Paradigm Biopharmaceuticals Limited (ASX: PAR) is a biotechnology company engaged in repurposing the drug pentosan polysulfate sodium (PPS) used for the treatment of inflammation. The Company is focused on drug repurposing by finding new uses for old drugs. Below are the key price indicators for the stock: -

Price Action Analysis (on the Weekly Chart)

PAR's prices broke the downward trend line resistance at AUD 2.92 on February 08, 2021 and hovering around the breakout level. Prices also broke the resistance level of AUD 2.88 and now approaching the next resistance level of AUD 3.55 and for the short term (2-4 weeks), we can expect upside movement in it. Any further breakout above the AUD 3.55 accompanied by volume may extend buying in the stock.

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 increasing volume trend along with an increase in the stock’s price action further indicates the bullish trend. The CMP is above the 21-period SMA and 50-period SMA, further providing strength to the prices.

Financial Summary: 

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Paradigm Biopharmaceuticals Ltd. is looking technically well-placed on the chart and we have a ‘Spec. 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 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 February 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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