Momentum Monday 31st July

Welcome to Momentum Monday, the end of July and the beginning of reporting season.

Access your reporting season calendar here. It has seen a number of new inclusions since it was originally published, so be sure to check on it periodically.

We are approaching what is likely to be “from a fundamental perspective” a weaker reporting season than usual. As I mentioned in the “Forewarned is Forearmed” article last Wednesday, with downgrades outstripping upgrades this confession season, margin compression is what the market will be watching most closely.

So with this backdrop, most analysts are not expecting companies to shoot the lights out, but what you need to be careful of however is companies who disappoint relative to their peers as there is a real risk they will be dumped and left behind.

Also I want to thank those of you who have already engaged with our “Empower Others” program. We look forward to helping your friends anf family once they are ready to reach out to us. If you want to learn more about the program you can read about it here

The content for this week's edition:

• 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

The US continued on its positive trajectory last week. The S&P rising 1.01% and closing slight above the March 27 lower high re-confirms our view that the new target is now the all-time high of 4766

S&P500 Weekly chart

Much of last week's gain was achieved on Friday’s trade. This was interesting to note, as we saw the Fed raise rates during the week by 25 basis points during the week. Adding to the confusing picture was GDP which came in at higher than expected and yet the market hardly moved (it actually fell on the day). What was most likely the kicker on Friday was an inflation gauge that the Fed supposedly follows closely, the personal consumption expenditures price index, which came in at +0.2% for the month. So the Goldilocks image of the economy many have hoped was re-affirmed and likely a catalyst for short term moves.

For the moment trade in the world’s largest exchange remains strong and investors have benefited. The weekly measures of MACD and RSI are strong and reporting season has gone well. At the half-way mark, there is a reported 79% of the S&P500 topping earnings expectations which is an improvement on last week and closer to normal averages. Even though earnings are expected to fall across the board, this result to date reaffirms the view by many that everything is priced In.

We remain exposed to shares globally.

AUS S&P/ASX200

A mini win for our market last week, registering its third positive week in a row and reconfirming the break out of the short term triangle that had formed. This further re-confirms the view that all-time high levels of 7628 is a strong possibility.

S&P/ASX Weekly chart

With the creation of a new short term higher high we do see a change in the complexion of the weekly chart. We can now see a pretty clear level of short term support in the range of 6995 and 7038. This is a range that has been tested three times and held thus far in 2023.

S&P/ASX200 Since start of 2023 Weekly chart

But we are closer to testing resistance than we are testing support, so we remain in equities. Hopefully the continued improvement inour market reflects some continued strong moves in our stocks

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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.

The analysis will be akin to what was covered under the “Stocks of Interest” within the previous Momentum Monday reports and is highlighted in the Shine Zone area below.

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:MRM - MMA Offsore

• StockRank 91

• Momentum Rank 97

• QM Rank 86

• VM Rank 97

• A$$1.335

In the last Friday Lunch ‘n Learn session (watch a replay here) - I spoke about what a NAPS (No admin portfolio system) portfolio would look like if it was started on July 01. One of those stocks was MMA Offshore (ASX:MRM)  as a representative for the Energy sector.

ASX:MRM 1 year Daily chart

It is a unique way to play the energy space as it provides vessels and other marine and subsea services to the offshore energy sector, government and defence, and maritime industries across the world, with 18 vessels stationed in 10 countries.

At the time of its half year report, the company flagged the potential of offshore wind energy as a major catalyst for short term growth including three contracts in Taiwan during 2023. It sees a continued strengthening market outlook through FY24 and FY25 and that has supported the price.

In the short term the stock is in a definite recovery with the break above $1.245 a sign that things in the short term are improving. The stock is at close to 52 week highs, is in the shine zone and the recent run up has been supported by volume.

But this is a stock that has a lot of work ahead of it given the significant and painful restructuring which saw the previous Mermaid Marine trade at adjusted prices of close to $24. Two years ago, this stock was $0.30 and the last time the stock was this high was 2019.

ASX:MRM 10 years Monthly chart

So the stock is in a significant long term downtrend, though it is rapidly approaching the previous lower high of $1.41, and for those wanting to consider a position, a break above that level, and then following a subsequent pullback may be prudent given the history weighted against it.

That said, for those with itchy fingers looking at a short term trade, ideally I would like the price to pull back to $1.25 - $1.27 with a stop loss at $1.05 which has been tested a few times previously and held.

Should price keep going up from here, I would still like to see a pullback with a stop at $1.245

ASX:SMP - SmartPay Holdings

• StockRank 77

• Momentum Rank 99

• QM Rank 99

• VM Rank 56

• A$1.655

SmartPay Holdings (ASX:SMP) is a stock included in both the 5% from 52 week highs and the Shine Zone (though it has been in and out on account of its heightened volatility)

ASX:SMP 1 year Daily chart

The company bundles various business related services leveraging off its EFTPOS payment terminals to be used in store. The rise of electronic transactions has fuelled growth, as has its bundled solutions approach.

The company has a strong presence in New Zealand (and is listed there as SmartPay Holdings (NZE:SPY)   though at a recent address to shareholders at the AGM the company said it is focused on growing more into Australia as it sees itself as only having 7% market share at the moment. The market was happy with the update (obviously) including the need to accelerating spending on R&D to launch an Android terminal and operating environment.

Notwithstanding this, I feel this is a very competitive field and therefore using charts is a good way to play this stock, especially for knowing where you may possibly exit. For me that level would be a breach below $1.52. Consumers are spending less at the minute (both in New Zealand and in Australia) and competing technologies are emerging all the time. But these phenomena have been known for some time and the market to date has ignored them. The reason I believe is because of the power of the "network effect" which SmartPay is building is potentially large as transaction growth compounds for each new terminal they win.

For investors nervous about getting in now, you may want to wait for a break above $1.80 for more confidence. But the chart has been going in the right direction for some time and the recent pullback may create an opportunity to acquire. Just keep your stops in place.

ASX:HLI - Helia

• StockRank 88

• Momentum Rank 92

• QM Rank 78

• VM Rank 98

• A$3.82

I last spoke of Helia (ASX:HLI) in June. At the time I said, provided the price doesn’t fall below $2.76 it is still in an uptrend. And here we are.

ASX:HLI Helia 1 year Daily chart

While I don’t have too much to add to the commentary from back then given the short term frame, I note that the company did provide an update on the accounting treatment of liabilities to the market last week the company did say that, “…low levels of claims and delinquencies continuing into 2Q23…” so expect a solid result when they report on the 22nd . But they did also say, “Over the course of 2H23, Helia expects Total incurred claims to start to increase toward long term average levels as delinquencies respond to expected modest increases in unemployment and higher interest rates, which may also impact dwelling values.”

At this point, it's close to 52 week highs, and the rise has been supported by volume. It has not been in the "Shine Zone" in recent weeks as the QM score is current 77, though despite this, the chart has looked strong. A stop between $3.45 and $3.50 would be appropriate

ASX:FLT - Flight Centre

• StockRank 81

• Momentum Rank 99

• QM Rank 90

• VM Rank 81

• A$23.21

It has been lift off at a number of travel businesses and Flight Centre Travel (ASX:FLT) is no exception. Travel is back to pre-pandemic levels (despite cost of living “pressures” LOL) Actually I will always remember the quote from HelloWorld CEO Andrew Burnes said at its 2022 AGM, “We remain confident that leisure travel will remain a non-discretionary component of the household budget.” - My Father would have laughed at that (and he didn’t laugh often). I digress….

ASX:FLT 1 year Daily chart

The question alluded to the “short squeeze” on FLT. A concept borne from the idea that those who have shorted the stock close their positions at any price (buy buying) because they simply got it wrong. At the time of writing FLT was the 2nd most heavily shorted shock on the exchange with 9.87% of its stock shorted. There is a bit to this idea as 12 months ago the stock had over 15% of its script shorted. Back then the price was just below $18.

Fast forward to today and the company provided a positive update at the end of July saying that it had “upgraded its 2023 fiscal year (FY23) profit guidance” and they are no island, as many in the space have done the same, eg CTD and WEB.

The corporate channel is doing well for the business and this is interesting because much of the short thesis is built on the idea that the stock cannot forever support its bricks and mortar business. The growth of the corporate division is seen as a pathway out of eventual irrelevance and therefore it is unsurprising to see bets come off the table.

The stock is at 52 week highs, in the shine zone and the recent run has been supported by volume. A stop from here (for those considering buying now) would be a failure to hold the gap created on 19/07 (date of the profit update). For those that have been in it longer structural support at $18.45 would be a more appropriate level.

I last spoke of FLT in March. I said better buying could be had at around $17.70 with a stop at $15.60 . The price hit a low of $17.36, and here we are today.

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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 28 July and is sorted by the stock code.

Changes from last week

Shine Zone list as at 28 July

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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 28 July 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 July 28, 2023

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