Wesfarmers Traders Outlook – Should You Invest?

Wesfarmers Traders Outlook – Should You Invest?

The Wesfarmers Ltd (ASX: WES) share price has edged higher in morning trade. At the time of writing the conglomerate’s shares are up around 0.5% to $40.43.

Although Wesfarmers is best known for its wide range of popular retail brands including Coles and Kmart, the conglomerate also has a presence in the resources sector. This morning that side of the business provided the market with an update on its quarterly operations. According to the release, the company’s share of coal production at its Bengalla site rose 25.5% on the prior quarter to 959,000 tonnes. This increased production was largely the result of operations progressing through a productive area of the mine sequence. Production at Bengalla is now up 1.6% over the last 12 months. Things weren’t quite as positive at its Curragh site. Coal production for the quarter came to 3,055,000 tonnes, which was a 3.2% drop on the previous quarter. Like mining giant Rio Tinto Limited (ASX: RIO), Wesfarmers’ operations were disrupted by Cyclone Debbie during the last quarter. But despite the weak quarter, production at Curragh is up almost 14% over the last 12 months.

Invest

In FY 2016 Wesfarmers’ resources segment provided $1 billion of revenue. Whilst this is of course a large sum of money, it does only represent 1.5% of total company revenue of $66 billion. Although it is positive to see production at both sites increasing over the last 12 months, it isn’t going to move the needle a great deal in earnings season. Because of this I wouldn’t necessarily invest in Wesfarmers on the back of today’s update.

Rather, I would suggest investors focus more on its supermarket business before deciding whether or not to invest. After all, the Coles business provided $39.2 billion or 59% of its total revenue last year. As I’m unsure how the price-war with Woolworths Limited (ASX: WOW) and Aldi is impacting its business, I plan to stay clear of the company until it has released its full-year result on August 17. In the meantime I would suggest investors in search of quality dividend shares consider this top stock.

Technical Analysis

Overall, the bias in prices is: Downwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

The projected upper bound is: 41.95.

The projected lower bound is: 39.37.

The projected closing price is: 40.66.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend.

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 35.6523. This is not an overbought or oversold reading. The last signal was a buy 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 48.62. 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 31 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 6. This is not a topping or bottoming area. The last signal was a buy 1 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 sell 3 period(s) ago.

Rex Takasugi – TD Profile

WESFARMER FPO SE closed up 0.430 at 40.720. Volume was 26% below average (neutral) and Bollinger Bands were 29% narrower than normal.

Open     High      Low       Close     Volume
40.640  41.060  40.630  40.720  1,648,502

Technical Outlook
Short Term:               Neutral
Intermediate Term: Bullish
Long Term:                Bearish

Moving Averages: 10-period    50-period    200-period
Close:                       40.75           41.20            42.28
Volatility:                21                 20                  20
Volume:                  1,900,774   2,345,535     2,304,044

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

WESFARMER FPO SE gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
WESFARMER FPO SE is currently 3.7% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of WES.AX at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on WES.AX and have had this outlook for the last 12 periods.

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Ivy Heffernan

My name is Ivy Heffernan, and I am interested in a wide range of professions. Economics and politics at the age of 18 is easy when your father has a Ph.D in economics, i have been taught to put together technical analyst and stay up to date with the changing markets as well as what is happening in the political world.

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