Momentum Monday - 22nd January

Welcome to Momentum Monday.

Think of markets like organisms, humans even. We breathe in (markets go up) and we breathe out (markets go down). Just like a human, if we keep breathing in without an exhale, eventually each gain tends to moderate, our exhales are then much larger. Its too early to tell if this exhale will be particularly large, understanding that it happens will help manage it.

In the links below, we talk of empowering others - and there will be no better timeto do that before the price rise on Feb 1 to $575. But lets be frank, given all that we have added to your service in that time - the price is still going to be dirt cheap (0.575% of a 100k portfolio - possibly tax deductible). But for anyone frugal enough to want to save over 20% should they sign to a free trial AND make their way through the 30 day money back guarantee period, then now is the time. As you are all members, I won't offend you by pointing out the extreme value we deliver.

Interesting links

• Weekend Watchlist with Shares for Beginners this week covered a minnow we discussed a recently covered stock and inclusion in the NAPS portfolio for 2024 SUL Super Retail Group. Listen here to the replay

• Chris has completed his quick 30 minute introductory session for non-members. For those who are yet to become members, be sure to have a watch here. Feel free to forward the recording to any interested party

• “Empower Others” referral program Learn more here

• Follow us on Social Media Facebook Linkedin Instagram or X (formerly Twitter)

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

Another week, and another all-time high for our friends in the US.

S&P500 Weekly chart

Bells are ringing and Bull Markets prevail as we close at the highest level since 2022. In fact, following the 19% loss in 2022, the S&P 500 roared back in 2023, posting a 24% gain. Even in the calendar year thus far (only short-term) the market is up. For the record, the market on Friday rose 1.23%.

Support came back heavily into the tech sector. It was the best performing sector in the US. Chip makers remain in favour, even Apple shares received a big upgrade from a broker which saw their price lift.

Quarterly earnings season in the US has begun, and while we tripped up a little early with some mixed results from the big financials, most reports now are delivering upgrades which has helped with sentiment and culminated with the strong close on Friday. 

We continue to see a goldilocks scenario with the US economy where good and bad news are mixed together - which is great for markets. I even read on Thursday that more than 50% of “market analysts” expect a rate cut in the US by March! This contributed to the US strengthening (as investors sort riskier assets apparently) which in tow dragged the USD up and Gold fell - though from recent highs. This week though we receive US GDP numbers plus personal consumption expenditure, both likely to cause a ripple.

Adding anything more will just taint a chart that is definitely now pointing north-east. The only thing to add at this point is that I have read in different places the average time a Bull market lasts is often 3.5x longer than a Bear market. This is derived by looking since 1928, the index's 27 bear markets (-20%) have lasted an average of 286 days, while its average bull market (+20%) has lasted 1,011 days. If the new bull market (+20%) were to last as long as the average bull, it would extend to July 2025 (Started mid June 2023).

Whether this is right or wrong I cannot say, but I know we are in equities globally.

AUS S&P/ASX200

From Monday to Thursday, there was very little to get inspired about with regards to the market. That changed Friday with a 1% rise, however the ASX/S&P200 still finished in negative territory, down about 1% for the week. The index is trading at one month lows.

S&P/ASX200 Weekly chart

My analogy at the beginning of this piece remains true, and therefore I am not necessarily concerned. We had a daily quiet macro week this week as markets and participants came back from Summer holidays. Taking some profits was going to happen.

Regionally as well there wasn’t much to talk about. Though I read with interest that Japan’s headline inflation rate fell to 2.6% in December, down from 2.8% in November and hitting its lowest level since June 2022. Japan’s core inflation rate — which strips out prices of fresh food — also fell to 2.3% from November’s figure of 2.5%, was in line with expectations and therefore we see no need for the BOJ to move too aggressively on rates anytime soon. 

I also noted last week that Uranium prices were having their moment in the sun, this week it was Coal stocks. As keen observers would note, the StockRank score for the coal miners is often higher than Uranium miners. That said it is all about the outlook. Look at WHC for example, it reported a fall in sales and production over the quarter, yet the price went up and hit 12 month highs. This was because big hopes are being set for the Coking Coal business made up of the large Blackwater and Daunia acquisitions. Other Coal stocks also had a good week. Coincidentally, Uranium which was one of the best sectors last week, was one of our worst this week. Such is the nature of volatility.

Speaking of such, investors in Lithium, and other Battery Metals may feel very different to the market at the minute. With record levels of shorting across the space,any hope for improvement in Lithium or Battery Metals in general, their prices is modest. And with four Lithium miners having over 10% of stock shorted (PLS is the worst with over 20%!) any ‘hopes’ for a turnaround will have to come with that (though investors in Coal, old “Uranium” and VR will tell you “hope” is not a good investment strategy.)

Back to the charts, and as mentioned, the pullback whilst need, always raises question marks. Especially as we see noth the MACD and RSI positive gaps start to erode. Again we are not concerned yet, but obviously we monitor these with some caution.

It was also interesting to see that the latest additions to the Shine Zone often came as a result of the 50 day moving average crossing above the 200 day moving average. And while I try not to look at the daily chart, I can’t help but notice the S&P/ASX200 is trading below the ATR, though well above support..

Therefore I remain comfortable, but remain vigilant to find the pockets of runners.

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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.

Also look at the market capitalisation and liquidity before making any decisions!

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: SUL - Super Retail Group

• StockRank 98

• Momentum Rank 99

• QM Rank 97

• VM Rank 98

• A$16.10

Getting quite a bit of attention recently is Super Retail (ASX:SUL). It has been included in the NAPS portfolio for 2024, and Chris wrote about the company recently and spoke about it on the Weekend Watchlist.

ASX:SUL 1 year Daily chart

However from a Momentum perspective we last discussed it in April 2023. At the time we said, “For those that have missed the run a breach above $13.53 would be pleasing as not only is that level close, but it would also symbolise a new high. As for a stop loss level on that entry of $12.06. $11.79 if you have held the stock for a while.”

The good news is that it did that. Breaking above $13.53, and easily staying above $12.06. So the question is, “What now?” After achieving new 52 week / all time highs the stock has pulled back a little (which I like to see.) It's definitely in an uptrend following a series of higher highs and higher lows, my short-term/trading support is at $14.50-$14.53. If the price moves closer to there it may be a good opportunity. I think there is a good chance as SUL either excites or disappoints. There is no halfway house. So either I will get my chance (or I will miss an opportunity - oh well… next one.)

ASX: DTL - Data#3

• StockRank 94

• Momentum Rank 91

• QM Rank 98

• VM Rank 83

• A$9.12

Another stock last discussed in the NAPS portfolio and viewed regularly by members is Data#3 (ASX:DTL)

ASX:DTL 1 year Daily chart

From a Momentum perspective it hasn’t been discussed since June 2023. At the time I pointed to the $6.23 level as what I was happy with. This is really interesting because if we look at daily charts we see that level breached in August, however for the week, the stock actually closed up. Such whipsaw events can make investing difficult. So what did I do?

Unfortunately I took the hit and watched the price rebound... Only for a little though… As you will see it was back in the shine zone in a few days. There was a good chance the gap at $7.50. And it did. For as long price stayed above support at $6.73 I was going to be in.

So where was my second error? Cleverpants (ie, Me) thought that all-time highs for the stock would be a great level to take profits, and I did at $7.88. Problem? The stock is $8.88 today. I am now patiently wait for the price to pull back, but it keeps running meaning I have missed this continuation - though I’ll keep watching.

So what are the lessons?

1.Never be afraid to buy a stock higher than what you sold it at if you believe in the business (this is the hardest skill of a trader to master.)

2. If you really like your business, never take your eye off it. Keep it on your radar and pounce when you have too. Markets are never static. Investors are rewarded for patience - or at least I hope I will be.

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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

Also look at the market capitalisation and liquidity before making any decisions!

Data is at 20 January and is sorted by the stock code.

Changes from last week

Shine Zone list as at 20 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

Also look at the market capitalisation and liquidity before making any decisions!

Data is at 20 January and is sorted by the stock code.

Changes from last week

“Pulling out of the station” on 20 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 20 January and is sorted by the stocks closest to their 52 week intraday high.

Also look at the market capitalisation and liquidity before making any decisions!

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

Changes from last week

Stocks within 5% of their 52 week high as at 20 January

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