Australia: S&P/ASX 200 (.AXJO) making strong gains

Australia: S&P/ASX 200 (.AXJO) making strong gains

Australia: S&P/ASX 200 (.AXJO) making strong gains

Australia’s stock market carved its own path on Wednesday, making strong gains despite Asian markets falling and US futures pointing to a weak performance on Wall Street overnight.

The energy sector – one of the most sold since the start of the year – led the gains with an increase 7.5 per cent in one day. Macquarie Research issued a note retaining its outperform ratings on every firm it covers across the sector. “We remain constructive on our Australian oil and gas coverage despite the near-term risks to earnings,” the investment bank wrote.

“Our base case earnings forecasts now exclude most of the major growth projects, as investment has become less likely given the price volatility.”

Woodside Petroleum, Santos, Oil Search, Beach Energy, Cooper Energy, Karoon Energy, Senex Energy and Carnavon Petroleum have an outperform rating from Macquarie with expectations for share price growth ranging from 28 per cent to 100 per cent.

Listed companies are now expected to start asking shareholders to tip in more money to help them survive hibernation, but it won’t be easy. For example, Kathmandu’s biggest shareholder declared it will sit out the offer. And Webjet has decided it will have to substantially dilute its shares to raise the money it needs.

“People are getting ready for the capital raising that is coming,” said portfolio manager at Tribeca Investment Partners, Jun Bei Liu. “We expect to see a lot more over the next few weeks.”

The S&P/ASX 200 enjoyed a relatively stable session, moving gradually higher all day except for a softening in the late afternoon. The index jumped at the close to 5258.6, a one day gain of 181.77 points.

Share price movements continue to be unusually large, with 23 companies increasing more than 10 per cent. AP Eagers gained nearly 15 per cent to $3.48, Worley increased 14.5 per cent to $7.04, Challenger gained 14 per cent to $4.56, and Beach Energy rose 13.5 per cent to $1.30.

The positive sentiment dominated despite weakness in all major regional markets, except for China, during the session. US and European stock futures were also pointing to declines of more than 1.7 per cent.

The communications sector gained 5.3 per cent, thanks to a 4.2 per cent rise in Telstra shares to $3.20.

The biggest fall was a 7 per cent decline in WiseTech shares to $15.90 after analysts raised concerns about the length of economic shutdowns on the global logistics market. Plumbing company Reliance Worldwide fell 6.2 per cent to $2.44.

Technical Indicators

Overall, the bias in prices is: Downwards.

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

By the way, prices are vulnerable to a correction towards 6,057.30.

The projected upper bound is: 5,759.45.

The projected lower bound is: 4,685.44.

The projected closing price is: 5,222.45.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black 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 75.5917. This is not an overbought or oversold reading. The last signal was a buy 6 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 44.61. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 5 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 77. This is not a topping or bottoming area. The last signal was a buy 6 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 4 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed up 181.800 at 5,258.600. Volume was 27% above average (neutral) and Bollinger Bands were 155% wider than normal.

Open     High      Low     Close     Volume___
5,076.8005,272.3005,076.8005,258.6001,064,625,216
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 4,935.18 6,272.88 6,592.84
Volatility: 82 64 35
Volume: 1,428,925,056 1,080,597,888 727,763,456

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 20.2% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .AXJO and have had this outlook for the last 25 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.

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