Momentum Monday 09 October

Welcome to Momentum Monday.

And another week of volatility and nervousness awaits us without any clear direction either way as to whether we are flying at altitude, or plummeting to a complete mess. Which it ends up being is not our concern. We will only play with the cards we are dealt with and act appropriately.

Also remember one of the key tenements of my Momentum journey is that I am not using charts just “to make more profits.” Rather I come at charts to ”protect my capital” which in turn I believe leads to better overall performance. Its a sutle difference, but massive from a mindset perspective. So if you look at your own Momentum journey that way it may help when it comes time to sell (even at a loss) because the main game is not what money potentially you are leaving on the table, rather it is the amount you get to take home that I am interested in.

Last weekend we also launched a collaboration with “Shares for Beginners” one of Australia’s leading investment podcasts, where we will be covering one stock per week as a marketing exercise to help promote our methodology and our approach to a much broader audience. We encourage our members to also follow the “Weekend Watchlist” podcast as they can make direct links with the topical stocks being discussed. If you listen to podcasts regularly, find “Shares for Beginners” in your favourite streaming service.

Alternatively if you want to follow each episode one by one, then go to this link https://shows.acast.com/shares-for-beginners/episodes/. We will also be adding a copy of the recording in the Discussion section for each company covered (for a limit of 6 months only) . We have actually created a generic blog topic for members to stay across our recordings that you can access. The relevant company will appear as they are published.. Visit the post here and be sure to bookmark the page for easy access in the future. Alternatively, follow us on social media as we will be posting a copy of each weekly episode there.

We will also be covering this and another topics in our next “Lunch ‘n Learn” session coming this Friday. You can book your place or alternatively if you can’t make it, be sure to register anyway and we will send you a recording.

Last week we put out the word for those willing to assist by sharing their experience with Stockopedia in a little video piece that they can perform from the comfort of their own desk. This initial response to date has been somewhat mooted, if you missed the original memo or didn’t have the time to previously respond, please express your interest in the comments section below or email us support@stockopedia.com.au . We would value the opportunity to be in touch shortly.

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.

---

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

During the week, the S&P500 got within a whisker of our new very short term target and bounced off it.

More importantly it finished the week up +0.48%, the first positive week in 5.

S&P500 Weekly chart

Though let's be real about this, had it not been for the particularly strong close on Friday (that no one can seem to attach a narrative to), it would have been a losing week.

Therefore it still feels like negative sentiment is the general prevailing theme, though bounces as we experienced (where the bottom wick on the candle chart is long though we still finish in the green) are generally viewed as a positive sign as they reflect buyers attempting to regain some semblance of control. Fingers crossed that can continue.

However the main theme remains. That is that the index stays above the 4124 level for now. Therefore we can stay in global equities and continue with our current strategies. Though for those that have acutely felt the recent broader market performance you will know now is not the time to be complacent managing stocks from a Momentum perspective.

As a closing thought, while it is unknown at this point how the escalation of geopolitical events over the weekend will play out on sentiment this week, it will command much of the news headlines so it will be a presence. Safe haven assets like gold will remain sought after. Further, any escalation on events across the region will also impact oil prices as well with the impact on global inflationary sentiment felt.

AUS S&P/ASX200

It was our third negative week in a row, and as of Wednesday we had breached the lower level of support. However, two consecutive positive days on Thursday and Friday were enough to lift us back into the support range.

S&P/ASX200 Weekly chart

Clinging on for dear life, it is important to recognise from a short term perspective, this level has been tested four times thus far in 2023, so it is a significant range. What price does from here will be keenly watched. Especially when it comes to determining whether 6474 gets retested again (remember that longer term support level??? I haven't spoken about that is a while.)

It feels choppy at the moment. Less is more in this current market as the groundhog day experience we have been living for the last two years remains the only program on our screens.

This has seen a large number of stocks fall out of shine zone   and 5% from 52 week highs screens, and there are very few buses pulling out of the station with a continued drop off across all three this week. This is unsurprising when one looks at the ASX Small Ordinaries (which is actually the ASX300 minus the ASX100) which tends to include many of the stocks we look at.

ASX: XSO 2 year weekly chart

It’s been going sideways for a year and now is touching bottom support and at 52 week lows. This negative bias and sideways drag has seen the lists that we produce significantly cut in size and many stocks have been removed. While the initial reaction is to glaze over the results, we can’t ignore the reality and what is being produced is simply reflecting the market at the moment.

In summary. we remain invested in equities but keep two eyes on your stock specific charts at the moment.

---

Member corner

In this section we will provide a detailed chart assessment 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. 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:TUA TAUS

• StockRank 83

• Momentum Rank 95

• QM Rank 92

• VM Rank 80

• A$2.10

Spun off from TPG Telecom and the now sole focus of reclusive CEO David Teoh is Tuas (ASX:TUA) .

ASX:TUA 1 year Daily chart

Rolling out a new fibre network in Singapore appears to be a very lucrative business as confirmed in the recent FY result. Though the company is still loss making, it is growing revenue at a very strong clip and on this trajectory will likely be NPAT profitable (or close to) at this time next year. This is definitely enough to keep the Teoh fan base engaged.

On a one year chart basis, resistance is clearly at $2.20. You will see that the level has been tested in July, as well as September and October (following is strong result), therefore I am keen to see a break of that level and a subsequent pullback if one was not to already hold the stock. Especially as OBV has remained relatively flat on the latest run up suggesting (if the literature can be believed) that the latest bounce may be about to lose some puff.

From a longer term perspective though we can clearly see that resistance for this business is all time highs achieved after the significant run seen from mid 2021 to late 2021. Notwithstanding what I mention above, I would be reluctant to buy in on a break above the $2.20 level, as it won’t be far to get to all time high (and possible resistance) level $2.26. I would prefer pice hit that level, pullback, and then consider it.

ASX:TUA Since listing Weekly chart

But since the 50% pullback from all-time peaks, the stock has achieved a series of high highs and higher lows and looks strong, supported by the latest financials.

Again ideally I would want to see a pullback first before committing to the stock at these levels, possibly to $1.75, however you wouldn't be the first being left in the dust behind a David Teoh run organisation. Hands down he is one of the more respected leaders in the entire market, and a legend amongst telecommunications followers.

If you are holding the stock now, support would be at $1.75 as investors need to expect volatility with this stock. For those of you who don't have a man-crush on David Teoh (like I do) and therefore want to preserve the recent gains you made given the market tumult, then look to $1.95 as your stop.

ASX:RMS Ramelius Resources

• StockRank 91

• Momentum Rank 97

• QM Rank 99

• VM Rank 82

• A$1.585

Ramelius Resources (ASX:RMS) is a gold miner with a number of projects in Australia. It is currently trading at 52 week highs which is a very positive sign.

ASX:RMS 1 year Daily chart

A few things have worked in its favour, namely the price of gold and strengthening USD.

Also a resource upgrade at Penny Gold plus the smooth acquisition of Musgrave Resources (which cements its place in the Murchsion region) and then there was the Breaker Resources acquisition that the picked up prior to that, which for the moment, looks quite cheap. All have worked in its favour and is reflected in the positive move in the charts over the last year.

From a longer term perspective It is currently approaching key levels of resistance, namely the lower high of March. Then the lower high in November and May 2022. But while it has a bit of work to do to get back to highs of $2.50, there is a lot to like about this set up.

For me, zooming out on the chart I see support levels previously tested in Feb 21, Sep 21 and Jan 22, but then failing in May 22 were subsequently re-tested as resistance in April 23 and the price had been bubbling along now where it looks like it has some clean air.

ASX:RMS 5 year Weekly chart

In short, this looks like a good setup since the lows of October last year and therefore one to definitely watch. Following what appears to be shrewed acquisitions, one would argued they are better placed that they were in March 22, and provided gold prices can remain strong and they can keep a lid on expenses, then it would appear it has the market's favour

ASX:CSL CSL Limited

• StockRank 44

• Momentum Rank 53

• QM Rank 62

• VM Rank 26

• A$250.20

CSL (ASX:CSL) last week was one of the most viewed stocks on the program. No doubt investors wondering whether the recent sell-off is justified and whether the current price provides an opportunity

ASX:CSL 1 year Daily chart

We last discussed CSL in December 2022. Back then we noted that the price was stuck in a two year channel of between $320 and $240, and at the time $280 was an appropriate stop loss level for investors. History tells us that level was tested and then failed a few months after and was breached in June and in fact got to as low as $246 and is trying to stay in the channel for dear life.

ASX:CSL 5 year Weekly chart

For "brave traders" a nibble may be had now as "you won't have to wait long to know if you are wrong". It's obvious to me that $240 is a structural support zone and for those hoping for a channel trade we are currently at the bottom of it.

For those wanting confirmation that the short term sell off has ended, a rebound to at least $272 is first required before we can even start looking for the right set up.

But the fact of the matter is this is a very challenging chart at the minute. Did the company pay too much for Vifor given its biggest product, an iron deficiency treatment called Ferinject, faces competition from generic competitors over the next year because of the expiration of the exclusivity of its patent this year.

Time, and the chart, will tell.

ASX:AKE Allkem

• StockRank 81

• Momentum Rank 51

• QM Rank 75

• VM Rank 72

• A$10.69

Another Lithium stock was keenly watched by members this week in Allkem (ASX:AKE).

ASX:AKE 1 year Daily chart

We last spoke of AKE in June. At the time we talked about how most gaps get filled in time. In the case of AKE, we discussed that the gap between $13.18 and $14.20 could act like a magnet to price and provide better buying there, and so it was. However the level of $13.18 did not provide support as hoped and this would have been a losing trade.

In fact the retrace passed right through that level and $10.00 is looming as our structural support level again. So with that in mind if you bought now that would be an appropriate stop loss level. Failure to hold that level puts the price at risk of falling to $7.70.

If $10 holds then traders will want to be careful this is not a "dead cat bounce" (false rally). This is because if the next high is a ‘lower high’, then we have a potential double top forming. If that rally subsequently loses steam and then breaches $10, downside targets become very scary - around the $4 mark.

ASX:AKE 3 year Weekly chart

Please don't shoot the messenger. I am only articulating what common thinking on the topic of double tops says. There are still a few things to play out first, and as I say, don't try to predict the future. Rather look at what you have in front of you and manage your positions on probability.

But this is a messy chart at the moment. It has a lot of work to do to find some clear air and for those wanting a bit more confidence getting in, some indication that $10 will hold may be prudent.

CLOSING NOTE: We intend to talk about MFG Magellan Financial Group at this coming Friday’s Lunch ‘ Learn session. Book your place by clicking here.

---

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 07 October and is sorted by the stock code.

Changes from last week

Shine Zone list as at 07 October

---

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

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

Data is at 07 October and is sorted by the stock code.

Changes from last week

“Pulling out of the station” on 07 October

---

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 07 October 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 October 07, 2023

---

Important Information: Stockopedia Ltd ABN 39 757 874 670 UK business registration number 0637267 (“Stockopedia”) is an Authorised Representative of Daylight Financial Group Pty Ltd ABN 77 633 984 773 (“DFGPL”) which is the holder of an Australian Financial Services Licence (AFS Licence No. 521404).

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