Momentum Monday 02 October

Welcome to Momentum Monday.

Congratulations to supporters of Collingwood and Penrith for your wins over the weekend. As a disappointed Carlton and Storm supporter, I can take solace that the two best teams in either code made it to the big dance, which is only fair after a big winter campaign.

You may have noticed that Stockopedia launched a new feature last week. If you want to learn more about it read here. I am going to be incorporating the ‘most viewed’ widget in the Member Corner segment. More in a moment. We will also be covering these at the next Friday Lunch ‘n Learn session in two weeks time. You can book your place now.

Next week, we will also announce a new collaboration with a third party provider to help spread the Stockopedia message and enhance the value members receive. The more we can welcome into our community the stronger we will be. More on that next week.

We all need to do our bit. Don’t forget our “Empower Others” program is a great way to introduce a friend to what is hands down the best value investment research service in Australia, New Zealand and the entire World. Read more here.

We do actually hope for some assistance in spreading the word and request that you assist us with a little video of support from the comfort of your own desk. If you are interested in helping us at some point soon, either express your interest in the comments section below or email us at support@stockopedia.com.au . We will be in touch shortly.

Last week we introduced a new section. So the content for this week will be as follows:

• Broader market sentiment

• Member corner

• Stocks in the “Shine Zone” (including changes)

• Buses pulling out of the station (volume + price movers)

• 52 week high screen (including changes)

We are always open to suggestions on how to make this contribution better, so if you have any, please feel free to write them in the comments below. All comments to date have been noted so thank you.

A reminder that you don’t have to read all this contribution. Simply scroll to the area of interest.

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Broader Market Sentiment

As we are adding more to the Member Corner, this section will be made shorter to compensate. There will be less macro talk as that is available at other sources. We will limit discussions to chart moves only. Feedback is welcomed.

We look at the direction of both the US and ASX markets to gain an understanding of the broader sentiment at the minute. It is important to stress here that I DO NOT use this to time my entry or exit out of stocks. I prefer to use the individual charts of stocks to do that. However I find it useful in helping us determine how aggressive/cautious traders should be in their trading. In short the more positive the broader market is the more risks you can take and vice versa.

US / S&P500

The September quarter was the worst for the S&P500 falling 3.7%. Much of that captured in September which saw the index fall 4.9%. For the week it was down -0.7%, the fourth consecutive.

S&P500 Weekly chart

The view reaffirmed a fortnight ago that we could be due to test circa 4180 remains in play on account of the breach of 4535. Also as mentioned before, pleasingly this would keep us above the 4124 short-term support level.

As frustrating as the current market is, we can still remain exposed to equities globally.

To finish on a positive note, given the 4 consecutive down weeks, we are closer to a positive bounce, relief can’t come soon enough for frustrated traders. But it will be a little soon to suggest this downward move is over. Looking at the daily chart for example we can see the index is currently stuck in a short-term downward channel.

S&P500 2 year Daily chart

You will also notice that we are at a key integer where the downward move has taken us to the bottom of the upward channel trend formed from the low in October 2022. While this chart looks at daily moves and is therefore more appropriate for shorter timeframes, when assessed against the weekly chart it further emphasises the relevance of this current period. Traders must accept it could go either way.

AUS S&P/ASX200

It was another down week for the ASX/S&P200 and now it as at the very top of the short term support range of 6995 to 7038.

S&P/ASX200 Weekly chart

Friday was the last trading day of the month and quarter and the ASX200 has experienced a tougher time of it.

Week = -0.29%

Month = -3.5%

September Qtr = -2.15%

In fact one pleasing thing to witness was the fact the market held up incredibly well in what was an aggressive selldown the week before. Actually technically we did not create a new short term weekly lower low.

What is a little concerning is that this was the second week the market closed outside of the ascending triangle. Therefore I have to say a retest of the support zone is the most likely outcome, but there is hope this might be avoided.

Unsurprising to see the RSI and MACD move further into the red given this week’s index performance.

The chart is saying we can still invest instocks. The vibe is telling us there is worse to come. The reality though could be anything so be pragmatic.

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Member corner

In this section we will provide a detailed chart assessment, on a maximum of ten stocks weekly, on companies from those of you in the Gallery.

We welcome stock requests from members. We will also be looking at the charts of some of the more actively researched stocks for the week. We will try to rotate through a selection so as to not make the charts stale. Hence why we welcome member suggestions to keep our list fresh.

Also please note, that while we may receive a number more queries than can be covered, therefore we retain the right to save a stock for another week, or ignore it all together.

To learn of the methods used to analyse companies in this section, refer to my Momentum Journey series that I articulate here in three parts.

Episode 1

Episode 2

Episode 3

They will help provide context on what I am writing about and the editorial angle of this report.

And again, if you have a stock you would like analysed from a momentum perspective, please write it into the comments section below or email us at support@stockopedia.com.au

ASX:RMD Resmed

• StockRank 45

• Momentum Rank 27

• QM Rank 60

• VM Rank 14

• A$23.60

Resmed (ASX:RMD) was the most looked at stock by members and is there any wonder given the large pullback it has experienced.

ASX:RMD 1 year Daily chart

Back then I said, “but more relevant in my view is $28.30 low of May 2022. If it fails to hold that by the end of the week then downside targets are back towards the $23 mark.”

And here we are with the stock closing the week at $23.

Of course the price had been lower and we have seen a bounce which is pleasing, though still well off 52 week highs. The bounce however does create a point from which we can start to monitor from a Momentum perspective. In short, while a pullback and another run at $24.10 would be a possible short term entry, the price needs to hold $21.44. That would be a stop loss from here.

As an aside, for those that have followed me from the Spotee Connect days, they will know that when I see high quality business that has fallen 50% from their highs I get excited. To that end, if RMD falls below $20 on this pullback I will look to accumulate. (BTW this is NOT a momentum strategy. This is my ‘cheap quality’ strategy.) Why? Because rarely do high quality businesses have such aggressive pullbacks, and when they do…. What is an extra few cents when you are looking to hold for a longer term? Buying in the $19’s means COVID lows of $18 would be a stop.

ASX:RMD 5 year Weekly chart

Otherwise (back to Momentum), in my view they will need to cross above $24.10 before I give it a second glance.

For those continuing to hold, having ignored the previous stop loss levels means you are holding it for reasons other than momentum. Fingers crossed for your sake it can hold $21.44

ASX:PLS Pilbara Minerals

• StockRank 91

• Momentum Rank 53

• QM Rank 80

• VM Rank 79

• A$4.30

Before I begin I need to mention I hold and have done so for a very long time, therefore I don’t use charts with this holding. However we last discussed Pilbara Minerals (ASX:PLS) in a momentum contact back in April.

ASX:PLS 1 year Daily chart

Back then the price was looking a little sick with a new set of lower lows set. Since then the price has recovered and pleasingly from a short-term perspective has created a new higher high. Of course it has yet to create a new high low, and investors will be hoping it can as that will be a bullish signal and would form the catalyst for a re-test of the next significant level which is all time highs at $5.43

More likely though I believe the price it range bound for the minute, The easy money in Lithium has been made and with increasing supply coming onto the market in a few years, stable prices is the best investors can hope for. That said, as PLS looks to build out its downstream offering over the longer term that will be a positive.

From a level perspective the price needs to get above $5.37 and at all costs stay above $3.43. Lithium prices will have the biggest say in the short term which is tested first.

ASX:WHC Whitehaven Coal

• StockRank 98

• Momentum Rank 75

• QM Rank 91

• VM Rank 96

• A$7.11

Whitehaven Coal (ASX:WHC) is a stock that has been discussed a number of times within Momentum Monday. Most recently back in April where the price was looking set to have another run after a fairly rapid sell off.

ASX:WHC 1 year Daily chart

I will preface my comment here by saying that I have been a fan of WHC for some time. I held it and was stopped out after the strong run it had in 2022. Following the April commentary I waited for the price to get back closer to $7.28 and I got in. Unfortunately though I was stopped out at $6.35, and though the price get falling initially, it has rebounded again and finds itself back at Resistance. The level is strong as we can see given it has been tested 4x since then. The pleasing thing is the low of September was higher than the low of late May.

I am therefore tempted to get back in on the next pull back. When exactly? I may try my for $6.45 - $6.47. Why ? Because that still will see the price above the ATR, further “I won’t have to wait long to know if I am wrong” as it will be close to the structural level of $6.05 - and my previous stop was a little generous. The other important thing is that if I do get in and the price fails the $7.28 - $7.30 level again, then I will insert a parachute stop at my buy price to protect my capital. (FYI If you want to remind yourself of what I mean by a parachute stop read Episode 3 above.)

Should it fail to hold $6.05, then $5.11 comes into play. So I will make sure my stops are tight.

ASX:BHP BHP Limited

• StockRank 82

• Momentum Rank 65

• QM Rank 77

• VM Rank 79

• A$44.25

We last stock about our market’s largest business BHP (ASX:BHP) back in February. At the time we mentioned that most in BHP are longer term investors and therefore unlikely to be moved by charts. However for those trading it the stop loss would be set at $45.25.

ASX:BHP 1 year Daily chart

That level was subsequently breached and since then the price has done not much, (though it does have a downward bias given the series of lower highs.)

One suspects the level of between $42.00 - $42.70 will be important to hold from both a stock and market perspective. What happens with China will have a big say there. Short-term trades hoping for some turnaround will want to see a break above $45.76 at the very least... $46.00 even.

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Stocks in the Shine Zone

To learn about the Shine Zone and how to use it, you can read it here.

The rules for inclusion in this list are based on those I like to see in a stock before considering a trade in it:

• QM Rank above 80

• Price is above the 2.5x ATR

• 50d MA is above the 200d MA

• Price is greater than the 200d MA

• Market cap greater than $200M

This is a very important point: the “Shine Zone” are rules for possible buying. They are not for holding and/or selling. If a stock falls out of the shine zone, use support levels to set your stops, or instigate a parachute stop if necessary. With markets moving sideways, one expects frequent changes in these lists.

If you feel there is a stock that should be included but is missing please let us know. This is a manual process and occasionally one gets through the cracks

Data is at 30 September and is sorted by the stock code.

Changes from last week

Shine Zone list as at 30 September

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“Bus pulling out of the station” *New Section*

This section was introduced last week.

To learn more about this screen read the following article on the objective of the screen

Please let us know any feedback

Data is at 30 September and is sorted by the stock code.

Changes from last week

“Pulling out of the station” on 30 September

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52 week high screen

In this section we identify stocks within 5% of their 52 week intraday high based on the idea, supported by academic studies, that stocks close to their 52 week highs tend to outperform. Weekly changes to the list will also be noted.

If you wish to recreate this screen in the screener select "Price vs 52 high" greater than -5% and Mkt Cap greater than $200M

A stock coming onto the list is NOT an automatic buy, just as a stock that leaves the list is NOT an automatic sell. As with the shine list, assess every chart on its merits. However movements on this list may alert you to interesting charts so be sure to look at Stockopedia and the chart first.

Data is at 30 September and is sorted by the stocks closest to their 52 week intraday high.

And remember, past performance is no guarantee of future performance.

Changes from last week

Stocks within 5% of their 52 week high as at September 30, 2023

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Information in this commentary is current as at date prepared unless otherwise stated. However, please bear in mind that investments can go up or down in value, and that past performance is not a reliable indicator of future performance. For more Important Information please refer to the Disclaimer section of this website.

This communication may contain general financial product advice. It has been prepared without taking into account your personal circumstances, and you should therefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it.

If our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement (PDS) before making any decision.

The author holds interests in PLS and in companies listed in the data tables . This position can and will change at any time without notice.