Momentum Monday 05 December 2022

5th Dec '22 by Elio D'Amato

12 comments 631 reads

Welcome to our Momentum Monday newsletter.

Remember: In Stockopedia momentum doesn’t just mean price moves (though it is a big part of it.)

Just to refresh your memory Stockopedia’s Momentum Rank is a ranking system based on a blend of price momentum and earnings momentum in the form of upgrades, positive revisions to earnings and earnings surprises to learn more, read here.

In this report we pay no attention to the factors of Quality and/or Value. However, when combined with either of these two factors, an analysis of the charts can be a powerful strategy, if applied with discipline.

Week ended 2 Dec 2022

Markets have experienced strong rallies across the week on hopes that the pace of inflation, and therefore rate rises, are slowing and that China may be close to solving its Zero COVID policy issues.

I start by looking at weekly market charts (Both the S&P500* and the S&P/ASX200 in order to determine whether we can be aggressive in our stock positioning or whether we should be more cautious. Once established if our market is in an up or downtrend, only then do I start to look at individual charts and act accordingly.

* The reason for looking at the US S&P500 chart is because it plays such a large role in the sentiment of the broader Bourse and therefore it can’t be excluded from broader consideration.

S&P500 (US)

The S&P500 achieved its second consecutive week of positive gains.

This recent run has taken the index to the top of the well-entrenched downward channel. A channel which had been forming since December 21.

In the short term we are at a pivotal juncture in the US market. Either the index will hold and rise above 4280.1 which will be bullish and see the next level likely to be tested around the 4620 mark.

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S&P 500 Weekly Chart

Or, if it fails to hold 3903, there is a real risk we could head back to sub 3400 which is the bottom end of the channel. The level is relatively significant for short term investors given the past three weeks have seen the wick of each weekly candle come close to testing.

Chart, box and whisker chart Description automatically generated

S&P500 14 Nov – 28 Nov

Pleasingly, the index has been able to consolidate…

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Peter John

5th Dec '22

I thought the analysis was excellent and can only support your efforts. However, my main interest is resource stocks and the current vogue sector in lithium. Was very happy to see the note from Sam that you are launching a dedicated team to focus on Australian stocks. Cheers.

Elio D'Amato

We're onto it Peter. We couldn't be an Australian contributor without discussing the big and lill' diggers from time to time. After all... they make up nearly 37% of the entire ASX in terms of number. Enjoy the show! BTW if there are any you are interested in us having a look at, you know where to find us.

ADM123

thanks for this excellent development!

You're welcome. Chris and I plus others look forward to delivering more over the coming weeks.

John Sciacca

6th Dec '22

Thanks Elio

So will you be providing a Momentum report every week on the S & P?

It was really helpful in understanding where we are in the market

That is the plan John. Just an important point of clarification for others (though I believe by your statement you are aware of this John). I don't try to predict the future.

My style of looking at charts is based on a strong tendency for prices going up to keep going up and vice versa. Our job is to try to identify when that sentiment shifts.

I will try to add a bit more 'science' to this concept over the coming weeks as I discuss my momentum journey (with instalment one also published today) .

But 'yes' I do look at the broader S&P/ASX200 and SP500 as their sentiment affects how aggressive one can be in both position sizing and in 'buying the dip'.

Thanks for the kind sentiment.

Elio

Do you mind if you can write a segment on MQG?

TIA

Absolutely. More than happy to, as yours is the first request I have had. Of course it may also get covered in the wide range of articles that we right from now on in...

Just a reminder to everyone else, if you do have a suggestion for stock to be looked at on a Monday morning from a momentum perspective then click on the little Green speech bubble in the bottom right hand corner >>>

While there is no guarantee we will be able to cover all requests, we are happy to fit one in if time allows.

ThatsIt

this is great thanks. I’m followingWhitehaven and Terracom (is the Div yield Stockopedía have correct?), it’d be good to have your analysis on these

Yes the Terracom yield is half correct. Its actually better as they have paid a dividend + special div twice in the last 6 months. The yield is expected to remain high but most expect them to moderate... a little. You can see the historic dividends here

So correct in fact that investors can't stop rubbing their eyes (and it has nothing to do with the lingering hay fever.) It has forced many managers to enter the space because not only are the yields so good, but they are still dirt cheap. I'm sure you noticed that the have very high StockRank scores (at least the ones in production). That said most, even the companies themselves expect thermal coal prices to moderate.

There is a lot to unpack with Coal miners. And I can't do it justice hear. Therefore it may require an exploration all on it own. But I encourage you to read their latest AGM presentations which will be available on your broker sites. The recent drivers for price are clearly articulated in their commentary. And its not just the Queensland super royalties tax.

Thanks for the suggestion

richardhutchinson

8th Dec '22

Thanks Elio, it's great to see a focus on some ASX and look forward teethe weekly momentum reports. Are you also looking at news /trading updates in terms of potential impact or focusing on the momentum that comes as a result afterwards?

Ours is a broad brief. So we will be looking at stocks from all angles.

But in this specific report it will be momentum only (up and/or down)

Momentum Monday 05 December 2022

Week ended 2 Dec 2022

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Elio D'Amato

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