Australia: S&P/ASX 200 (.AXJO) drops from record high as investors take profits

Australia: S&P/ASX 200 (.AXJO) drops from record high as investors take profits

Australia: S&P/ASX 200 (.AXJO) drops from record high as investors take profits

The ASX 200 dropped 0.6 per cent to 7,088 points at its close.

Losses were seen across the board, with energy and industrial stocks leading the falls.

“It’s still the best month we’ve had in more than eight years and the best start we’ve had to a new year since the mid-1980s,” said Steven Daghlian, a market analyst at CommSec.

“So, it is bound to happen that eventually we see the market pull back a bit.”

Oil prices slumped on worries of excess global supply, which led to shares of oil and gas companies Woodside and Santos shedding around 1.5 per cent.

Engineering contractors CIMIC Group and Downer EDI also dragged the market down, falling 20 per cent and 19 per cent respectively.

Sydney-based CIMIC said it was planning to exit the Middle East with the sale of its stake in BIC Contracting and expected to take a one-off charge of $1.8 billion, pushing its shares to its lowest value in more than three years.

Downer downgraded its annual profit guidance from $365 million to $300 million due to underperforming projects.

Australia’s most expensive stock, biotech firm CSL, also weighed on the market as its share price dipped 0.4 per cent to $307.19.

Westpac shares fell 0.2 per cent despite its appointment of new chairman John McFarlane — to help rebuild the bank’s reputation amid a money laundering scandal.

The Australian dollar lifted to 68.75 US cents after the unemployment rate fell unexpectedly in December.

Volatility ahead

This was despite a positive lead from Wall Street, which traded at its highest level ever — before pulling back sharply in the final hour of trade.

The industrial-skewed Dow Jones index finished 10 points down at 29,186. It had lifted by as much as 120 points earlier in the session.

The benchmark S&P 500 was largely unchanged, while the tech-heavy Nasdaq lifted by 0.1 per cent.

US investors initially shrugged off their contagion fears as technology giants like IBM reported a stronger-than-expected profit, which led to its share price jumping 3.1 per cent.

On the flipside, video streaming giant Netflix warned investors of tougher conditions in the months ahead and its share price plunged by 3.9 per cent.

“Certainly, the market is spooked by it [the coronavirus infections],” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management.

“But when markets are overvalued, like they are right now, any small hint of concern will send the market into a volatile moment.”

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 6,847.12.

The projected upper bound is: 7,250.97.

The projected lower bound is: 6,937.65.

The projected closing price is: 7,094.31.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 75.3365. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 67.49. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 89. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 10 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -44.700 at 7,088.000. Volume was 6% below average (neutral) and Bollinger Bands were 111% wider than normal.

Open     High      Low     Close     Volume___
7,132.7007,132.7007,068.8007,088.000 539,658,048
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 7,026.21 6,819.66 6,628.59
Volatility: 10 15 14
Volume: 509,166,464 549,427,776 610,020,800

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 6.9% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into .AXJO (mildly bullish). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 10 periods.

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