Momentum Monday - 08 January "Happy New Year!"

Welcome to Momentum Monday.

First up, “HAPPY NEW YEAR” and Seasons Greetings to you all. May the coming year be healthy and prosperous for you all. Speaking of which, we should all go on holiday more often as it is far more beneficial to our portfolios. More in a moment.

We resume Momentum Monday for a new year in 2024! Please refer to the Member Corner section for more detail on how you can make a request for a stock to be analysed. As this is our second year, and  with this contribution, here’s hoping for strongly trending markets.

Interesting links

• Weekend Watchlist with Shares for Beginners covers the NAPS portfolio of 2024. Listen here to the replay

• The new NAPS portfolio is constructed and covered for Aus & NZ. Be sure to read about this education tool here

• Here is the review of the 2023 version. Be sure to read it here

• Our founder Ed Croft has prepared the UK version of the NAPS portfolio. In order to build on your education be sure to read it here

• “Empower Others” referral program Learn more here

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This week’s content is 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)

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

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

Ding ding ding! The S&P500 finished the year at all time highs at 4769.8

S&P500 Weekly chart

To be frank, I am not going to get into the virtues of EOD or intra day highs. In generalist terms, we are at the top end of the range.

Of course the market decided to pullback from those lofty highs and it currently finds itself at 4,697.2 This was the first negative week for the S&P500 in 10 and broke a multi-winning streak that was decades long.

On Friday the S&P500 closed up despite the poor week. Much of that move coming from the strong payrolls number which showed more jobs than expected were added to the US economy.

But the market feels a little thin. As mentioned previously a number of times. The more aggressive the move up, likewise the more aggressive the move down. This shortened trading week saw the S&P500 fall 1.5%. While I hope that that is it for the moment, I am afraid selling may continue, but it doesn't change the broader narrative.

Even after the recent run, short term support remains at 4117. There will be no new short-term level created until there is a pullback of some sort to create a new structural level.

So despite the pullback in the last shortened trading week, we remain in equities globally.

AUS S&P/ASX200

Much like the US it was good to be away from computer screens. And just when we turn them back on, we have a tough week and gave it all back.

S&P/ASX200 Weekly chart

At the minute I am just as excited as the next guy…. However, look at the chart? All we did was hit resistance and bounce back. This resistance level we first hit in 2021, we finished this year right back at it. Therefore, it adds some reason to the recent rebound and could do with a pullback to support the run further. We shall see in the next few days what happens.

The Lithium retracement has picked up speed in the later half of last year. We are now starting to see mine closures as a result. This will be a good thing longer term , but in the short term it is quite scary. Just look at CXO's share price. I will have a couple on my radar for when support returns (ie Not now!)

With hindsight we can now see the retracement in the market from Early August to the end of October was not supported by volume as the OBV remained steady during the sell-off. Pleasingly the positive trend has resumed supporting the index on its rebound.

S&P/ASX200 August to December 2023 Daily chart

So did I get the evidence I needed to suggest we are out of this sideways move? Not quite. But I still remain more positive than not. We will of course keep watching.

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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 to be analysed 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, however we will likely not cover a stock within 2 months of when it was last discussed.

If you want to see what has been written about a stock recently, go to the discussion area.

We will not be making up suggestions. If there are no changes to the most viewed list and/or there are no suggestions from members, then no stocks will be covered.

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 @stockopedia.com.au">support@stockopedia.com.au

ASX: FMG - Fortescue Metals

• StockRank 98

• Momentum Rank 93

• QM Rank 96

• VM Rank 07

• A$28.19

We last spoke of Fortescue (ASX:FMG) back in October. Read it here . Its price has mimicked the rebound in Iron Ore prices, such is the nature of being a price taker.

ASX:FMG 1 year Daily chart

At the time we said, “... if it breaks resistance the next possible target could be $26.50.” Today we are at pleasingly $28.19. That prior target level of $26.50 is now support, so if you missed the recent run, that could prove a better entry point as you won’t have to wait long to know if you are wrong.

The thing that has been ignored in all of this is that the stock is trading close to all-time highs, and with exception of the opaque green energies business, not much has changed which leads me to believe that this is too elevated a level. But ‘think less make more money’ is what I will hold to. I would wait for the price to come back a bit, then insert a parachute stop of around 8% (acknowledging FMG swings 4-5% in a day).

ASX: JBH - JB-Hi

• StockRank 99

• Momentum Rank 98

• QM Rank 99

• VM Rank 99

• A$52.69

We last discussed Australia's premier retailer JB Hi-Fi (ASX:JBH) before in August. Read the commentary here.

ASX:JBH 1 year Daily chart

At the time I said, “ It needs to get above $49.31 to show it can have a chance of getting back to all time highs of $55.85 from March 2022.” The Good thing is price has rebounded to resistance, and now the question is what do we do now? My view remains to buy on retracements so I would be looking for a retrace back to $46 - $49 before considering it again.

The challenges for the Australian consumer are obviously an can't be ignored. This recent bounce relative to its performance boades as a positive for active traders in the stock.

However a break into all-time highs can't be ignored and if it gets there we will reassess.

ASX: SHA - SHAPE Australia

• StockRank 99

• Momentum Rank 96

• QM Rank 99

• VM Rank 98

• A$1.80

This is the first time we cover SHAPE Australia (ASX:SHA) in this forum. Normally not a stock I look at due to the low liquidity. However, members are looking at it and it has a QM score above 80.

ASX:SHA 1 year Daily chart

SHA is a construction services business who has been profiting from the recent increase in work. It's price broke out of a prolonged sideways movement when it bounced off a low sub $1.40.

The stock is rapidly returning to pre-IPO levels and technically if it stays above $1.50 it remains in a short term uptrend. While this level may be too much of a drawdown to stomach, a parachute level closer to here may be appropriate. However I caution again, from a momentum perspective, picking trends in illiquid stocks can be difficult. Fundamentals rule here and supported by the positive business update in early November , price has returned to favour. That said, cashflows can be lumpy and it won't take much to move, so be wary. But the trend is up, and that is a good thing.

ASX: CAA - Capral Aluminium

• StockRank 99

• Momentum Rank 90

• QM Rank 98

• VM Rank 99

• A$10.05

A stock very familiar with value investors is Capral (ASX:CAA). A forecast PE and Dividend Yield just above 5% enough to keep value investors interested.

ASX:CAA 1 year Daily chart

Another stock small cap investors need to tread warily with and where fundamentals can work better. Often keeping its cards close its chest, at the time of its half year result CAA told investors that while residential building is forecast to soften in 2H23 and that inflation will be troublesome, its other key markets are expected to remain strong and its lifted earnings guidance to top-end of its guidance range. Further, given the capex expected, it should maintain its dividend and continue its buyback.

Since then the price has formed newer high highs and newer higher lows. It is in an uptrend. Price is supported by increased volume. Though investors acknowledge this can be a volatile ride, especially when we look at what it has done since listing.

ASX: DUR - Duratec

• StockRank 84

• Momentum Rank 86

• QM Rank 91

• VM Rank 77

• A$1.63

This review is certainly including a lot construction services businesses and we have another in Duratec (ASX:DUR)

ASX:DUR 1 year Daily chart

Its obvious there is a recurring theme here. Though to be honest it is good to have many of these cyclical plays have their moment in the sun. DUR is no exception.

Like CAA and SHA they recently upgraded guidance. The only potential risk being the stepping down of Phil Harcourt as MD (though we note he will be replaced by Chris Oates, another co-founder of the business. It is larger than both CAA and SHA , but no less volatile in analyst expectations as evidenced by the big change recently from a Strong Sell, to a Strong Buy.

The trend is strong. A series of higher highs and lows evidence that the company is on a short term tear. The company is at near all-time high levels, and the pullback in September/October was healthy. Patient investors may wait for a retrace to consider a position. Impatient investors could buy now with a parachute stop. I feel the narrative changes for DUR if it falls below $1.09.

ASX:DUR All data Weekly chart

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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 06 January and is sorted by the stock code.

Changes from the last review on the 18th Dec

Shine Zone list as at 06 January

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“Bus pulling out of the station”

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

Here is a shortcut in understanding the reasons why a stock is removed:

• Volume drop = Bus might be moving, but no one is on it

• Price 1 mth < 0% = Bus has been cancelled

• Price 3mths >= 3% = Bus has pulled out of the station

Data is at 06 January and is sorted by the stock code.

Changes from the last review on the 18th Dec

“Pulling out of the station” on 06 January

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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 06 January 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 the last review on the 18th Dec

Stocks within 5% of their 52 week high as at 06 January

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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 DUR and companies listed in the data tables . This position can and will change at any time without notice.