Momentum Monday 28th August

Welcome to Momentum Monday. The broader market at the minute is frustrating, but as always there are pockets that are doing well. Reporting season has thrown up its usual challenges and surprises, and we must remember, this is the market behaving normally.

Next Friday's Lunch 'n Learn session will be a wrap of the reporting season so be sure to book your place when we send you an invite shortly.

Though I want to kick off this week’s Momentum Monday with a quote from one of our nation's greatest rag traders Solomon Lew, who at the time of the release of his company's report said (and I quote), “Consumers have lost their collective mind.” The retail sector has actually been a surprise standout this reporting period. I am sure the RBA will have noticed as well.

At Stockopedia we too would like to share in the consumer insanity so if you know who (literally) has everything, give the gift of Empowerment by sharing our details with them. Read more here. While perhaps we are not as comfortable as a pair of pajamas, we’ll hold our value MUCH better!

On that note, let’s get into this week's edition.

The content for this week's edition is as always:

• Broader market sentiment

• Member corner

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

• 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

We broke the string of three weekly loses with a positive week for the S&P500

S&P500 Weekly chart

The index remains above the short term support at 4124 so there continues to be no need to change our view on global equities (which is, “we are in.”)

It was a quiet week as earnings season ends for another quarter. IT has been the best sector for the month, helped by a blowout result from Nvidia (though much of it was already priced in.) There was also a focus on the US’s need to keep rates elevated as Federal Chairman Jerome Powell told a media pack at the annual Jackson Hole economic hoedown, that despite inflation markers coming back down, economic activity remains very strong and they are watching rates and won’t be afraid to use them if inflation picks up again.

A nothing statement such as this was enough to suggest that status quo for the moment prevails. So bond rates for the week also continued to rise as investors price in another lift in rates at some point.

The latest episode of Russian  despots and narcissists, otherwise known as “Days of our Russian lives” was not even noticed by the market. Whether this ultimately remains a sideshow, or the start of something more influential we shall see. I bet it will be forgotten pretty quickly.

And finally to keep the comedic theme of this week going, S&P followed the lead of Moody’s by cutting the credit ratings of US regional bank lenders. This after 3 of the 4 largest ever bank failures have already had the lawyers all over it. You can’t make this stuff up!!!!! I can’t believe people pay them for this! Its obscene.

As you can tell it was a quiet week macro wise so not much more to add at this stage, though we will when something pops up!

AUS S&P/ASX200

It was our busiest week of the reporting season from a quality stock perspective. However from a chart perspective we were looking good for a small gain, until Friday where we lost all of the weeks gains in a day.

S&P/ASX Weekly chart

So we now see ourselves at the bottom end of the symmetrical triangle, which by definition always comes in tighter as time moves on. This contraction is believed by many to be the precursor for a more aggressive move (either way) when the price breaks out.

As frustrating as we all must feel at the moment, it's not all bad. We are still in a short-term uptrend and the index remains above the short term support in the range of 6995 and 7038, though both the RSI and MACD worsened over the week.

As discussed last week, the Chinese question continues to overhang investor sentiment in the commodity sector, resulting in downgrades across participants. With commodity prices stagnate but costs going up investors are worried (though to be fair they have been petrified in the junior end of town for some time now.)

From a reporting season perspective things have been going ok with the usual boom and bust we always see being supported by some nice juicy dividends. Such as in the IT sector where the euphoria of ALU was balanced off against IRE and WTC (in the case of the latter it was the reason why IT didn’t finish as our best sector for the week.). Even in the retail sector where PMV, AX1 and WES shone, whereas LOV and COL . Healthcare continued to show the strains of rising costs and constrained margins. RHC and the continued slide of CSL offset the gain of TLX who narrowed their loss over the year.

But as always the fate of our miners and banks will govern much of the direction of the index - and whether it is China’s woes or our own - the broader sideways market looks appropriate. We remain exposed to shares.

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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.

If no one asks for a stock to be analysed, this section will remain blank.

Also please note, that while we may receive a number more queries than ten per week, 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.

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:BOE - Boss Energy

• StockRank 57

• Momentum Rank 85

• QM Rank 82

• VM Rank 46

• A$3.23

Boss Energy (ASX:BOE) is my preferred Uranium stock from a fundamental basis. For those that have been following me, they will know that I put much value on them being the next Australian Uranium producer with their Honeymoon project expected to come online in the December qtr.

ASX:BOE 1 year Daily chart

The price has found favour in recent times as the price of yellow cake improves. However, when you have invested for as long as I have, you come to learn that irrespective of all the fundamental markers... waiting for the Uranium price to boom is like waiting for a bus on a Sunday.... it just never comes.

So that is why I like BOE. It is fully funded, has lots of inventory (that it bought a few years ago and has now made quite the profit) and the price of a pound of Uranium covers expected AISC by 2.5x (assuming cost revisions don’t blow out.) The world needs Uranium and shortages are expected to support price and in my view BOE are primed to benefit.

I have been in and out of BOE a number of times in the past. The first time I did REALLY well. The next time I was stopped out. Now I am back in.

Most recently, once price broke above the resistance range of $2.91 - $3.05 that had formed since the end of 2021 and was tested three times (meaning that is was a significant level)

As is my usual rule, I waited for the pullback, which given the previous point of resistance now had become support around $3. For those considering a position now that is also my close call (aka break even) stop loss for the minute. At close to 52 week highs and with production looming soon meaning it will be a beneficiary of rising uranium prices, I feel it should do well.

But I use charts extensively on this as the expected Uranium sunrise in the past has disappointed. What is true though is that when they run, they can run hard and the profile of BOE appeals to me just as it did when it was sub $1 and I was talking to Spotee Connect members about it (a special ‘shout-out’ to former members).

ASX:BLD - Boral

• StockRank 90

• Momentum Rank 99

• QM Rank 99

• VM Rank 78

• A$5.03

I don't know what is with megalomaniac owners and employing the unemployable to lead their businesses? Mark McInnes running PMV comes to mind. As does Vik Bansal who was forced to quit Cleanaway due to staff bullying and harassment issues and then was subsequently employed by Boral (ASX:BLD) who is 80% held by Seven Group to run the company.

ASX:BLD 1 year Daily chart

But then again, even Sol Trujillo could run this business successfully. I have often commented on how building material stocks have been doing well. I hold both CSR and JHX (CSR is my preferred) and let's face it they should do well for years to come given the massive expected demand for new homes.

So why don't I hold BLD? Well, you can't hold them all. But mainly because of the 80% interest I spoke of held by Seven Group following a messy and protracted take-over battle through 2020-21 such a large beneficial interest makes me worried about motives for ownership and appropriate corporate governance.

But I don’t know how many times I have to remind myself, "think less, make more money”. If I had listened, I would have been in this. Charts like this are what investors hope Santa gives them for Christmas.

I would not buy at these levels, Notwithstanding it is in the Shine Zone and at close to 52 week highs, I prefer to buy on the pullback closer to support, and I see support at the recent gap at $4.38, which means I would be looking for $4.50+ as a better level to get in

But to be honest, I still probably won't, given my exposure to the other two. However, had I “thought less”, BLD would have been a welcome addition to my building materials 'rat pack.'

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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.

Read the “how to” article above to learn more

Data is at 25 August and is sorted by the stock code.

Changes from last week

Shine Zone list as at 25 August

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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 25 August 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 August 25, 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.

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