Momentum Investing Opportunities.

[KW]

This is a thread dedicated to ASX stocks in uptrends or breaking out.  It is focused on Technical Analysis, so anyone who thinks TA is a load of bulldust can stop reading now   

Inclusion of a stock herein is not a recommendation to rush out and buy it, it is merely for others to play along, and maybe get a feel for how Momentum Investing works over the long term.  For those that enjoyed my previous posts on timing the market from many years ago, this is the advanced version 

Timing the Market
First up - the market in general needs to be in a Buy zone.  By that I mean that the 50 day MA is above the 200 day MA and the index value is above both.  This indicates the market is in a general uptrend so you have a tailwind behind you before you even start.  As you can see, the All Ords is in such a position.  

For almost a year now the technicals have said "No Buy" so it was a time to sit on your hands, have patience, and count your dollar bills sitting in the bank.  Thats not to say that there weren't brief opportunities to take a trade or two in that time, but this post is about longer term trades, and rules for deploying substantial capital, so we want to have all our ducks lined up in a row to minimise risk.  

So now where to go duck hunting?  While the All Ords and the S&P200 are both in the Buy zone, the Small Ords is not. This would suggest that you limit your hunting to the bigger listed stocks, and not the small ones.  This is also wise as large stocks have more liquidity, and if things go to shit in a hurry you will be able to get out of your position quickly and without suffering a large price spread.  The NZX50 is looking similar to the ASX Small Ords, so its not in the Buy zone currently. 

Note that the chart does not prove whether its a new bull market, or a bear market rally that is designed to sucker you into losing even more money lol, but if it turns out to be the latter then we shall soon be looking at a lot of charts with Sell signals.  

All Ords
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Small Ords
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If you have any questions about Technical Analysis, fire away.  Please keep it general in nature though, not "should I buy this stock now" questions.  I am not a financial advisor, and I'd like to stay out of jail thanks. 

[Perky]

Thank you for doing this. I'm keen to learn 

[KW]

So now we are in a Buy zone, the market is looking favourable, and we are hunting in the mid/large cap space.  What is out there? 

Timing PMV
PMV is showing excellent promise as it moves into a new uptrend.  Its taken out its 200 day MA, had a Golden Cross, and has tested several levels of resistance and support.  Its also rebounded strongly after going ex-div on the 10th Jan. 

However note that it has not made a new 52 week high, so there is still substantial overhead for the stock to overcome around the $29 mark.  Some Momentum Investors will not touch a stock until it has made a new 52 week high.  Others will take a position anyway and just keep an eye on it with an exit plan in place in case the stock failed there, especially if the market was looking weak around that time.

For Basil's benefit  I will point out that PMV is trading on a P/E of 15.7, paying a dividend of 3.95%, with a payout ratio of 70% and with good growth in sales.   From its Dec announcement "Global sales for the first 17 weeks of 1H23 are up 24.9% on 'pre-COVID' 1H20 sales. Pleasingly, Premier Retail achieved record sales during this year's 'Black Friday' trading week including achieving its highest ever global online sales for a trading week."

I will reiterate here that Techical Analysis is best used as a TIMING tool for stocks that have good Fundamental Analysis results, rather than using it to PICK stocks to buy based on their charts.  So choose your stocks on FA, then buy/sell them based on TA.  



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[Perky]

KW, in your experiences is there a particular charting software or programme you recommend for us newbie students to use in the dark art of TA?

Something easy to use which I can play around as you show examples.
Not necessarily what you may be using yourself.

I use both Apple and windows os. Prefer Apple.

[KW]

KW, in your experiences is there a particular charting software or programme you recommend for us newbie students to use in the dark art of TA?

Something easy to use which I can play around as you show examples.
Not necessarily what you may be using yourself.

I use both Apple and windows os. Prefer Apple.

The charts that I post are created with Interactive Brokers, my trading platform.  You should check it out as you can open an account from NZ, and their commission structure is much lower than anything else on the market (but no access to NZX).  The best web based one is tradingview.com (it also has NZX data) although there are limits on the free charts so you might have to cough up a subscription if you want to really unlock its full power.  Incrediblecharts.com is a free software download and is also very good (but no NZ data).

I don't use any fancy indicators, I stick to the basics like moving averages (for both price and volume) and I draw my own resistance and support levels by eyeballing the chart.  Because I take a long term trade view, the minutiae of stock price movements are not material, I just want to see where the long term trends are going and when they change.   Over the years I've found that with TA, less is often more.

[Buzz]

Thanks KW, a thread I am interested in. I'm also into TA for timing, entry's and exits for stocks that pass the FA sniff test (and have been for a long time). When I'm at my computer I'll post a DOW chart (I prefer weekly to take out the noise, so my 50/200 is a proxy 17/43 EMA). DOW is a small collection of the largest US caps, that the index bounced in October'22 and has already done the above 50/200EMA, golden cross and above 61.% FIB retrace. It fits with your thesis of fundamentally sound large caps driving the turnaround, albeit not ASX per se. Possibly worth looking into the constituents of the DOW that are driving this turnaround. My chart https://invst.ly/-1bwc, it's nice and simple like yours, MA's, trend lines and a couple of basic indicators like volume, RSI, MACD, FIB's.

[Buzz]

I use Investing.com which uses the Tradingview.com chart engine. Register free and chart any stock, option, future, currency etc in the known universe. It's a thoroughly comprehensive charting solution, way beyond most peoples needs but excellent at all the basics and has all the advanced charting if that takes your fancy. Easy to use as well imo, just a few hours getting to know it and bingo, you'll never use any of the dumb charts like Incredible, Stockcharts, Bigcharts etc, again. JMHO.

[KW]

So here's one that you all without ASX access can play along with.  FPH is setting up nicely, similar to the other charts I've posted so far.  Only difference is that FPH is heading into a strong resistance barrier set up by the big price drop back in March 2022.

The reason why this will be a significant barrier is because there are a lot of trapped buyers there who will be looking to "get out even".  These are people who have been sitting on big losses to date, who look back and wish they had sold earlier, so when the stock gets back to that point instead of thinking "great, I'm finally on to a winner" they think "thank god, I've got a second chance to get out".  Also known as Loss Aversion Bias (highly recommend reading/studying behavioural finance as its the driver behind most of TA).

The flood of "get out evens" will put pressure on the stock price and it may break down again at that point.  If it does, then I would expect a retest of the lower resistance level as new support.  TA Rule - old resistance levels become support, old support levels become resistance.

Alternatively, fundamental good news could drive the price through that barrier and beyond, if the company management convinces the "get out evens" to hang in there.  As mentioned previously, TA does not predict the future, but the important thing to note is that it gives you the heads up you need to pay attention to the stock price when it gets to that point - have an exit plan ready in case it fails. 


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[KW]

ADH has a very similar problem to FPH - a lot of overhead coming up due to a significant breakdown in Jan 2022 which trapped holders.  Its through the first resistance level (which was the old support Jan to May) and all the other ducks are in row (price above the 50 and 200 day MA, golden cross).  It hasnt had a significant VOL breakout but there is a distinct increase in volume recently after a long period of low volume which usually indicates something like a fund taking a position (quiet and steady).

Also on the positive side, is that ADH has put in a double bottom, which has provided plenty of opportunity to flush out weak holders. 

Fundamentally this one has been a bit wonky lately due to issues with Mocka cots, shipping delays, and general covid disruptions, so its possible that when it reports earnings it disappoints and sends the share price back down.  The market trend is saying that it is expecting good news re future earnings, but sometimes the market gets it wrong.  It is currently trading on a P/E of 11, with a dividend yield of 6.2% and a 68% payout ratio, so any good news should see the stock significantly rerated to its peers.

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[Basil]

 "So choose your stocks on FA, then buy/sell them based on TA'.

Good advice that.  I don't chase momentum blindly.  The most money is to be made when both FA and TA say its a strong BUY.

[Ferg]

TA Rule - old resistance levels become support, old support levels become resistance.

Nice rule which is new to me given I'm no TA.  Thought it was worth quoting.  Thanks for sharing.

[KW]

Nice rule which is new to me given I'm no TA.  Thought it was worth quoting.  Thanks for sharing.

They are often levels where people place stop losses.  So sometimes you will see the price driven down to that level in order to go "stop loss fishing" - ie. trigger the stop losses, buy the shares, and then wait for the immediate rebound in share price.  So for that reason its always a good idea to know where they are, and to be able to tell a stop loss fishing exercise from a genuine break down in trend.  

[KW]

Here's a good example of how you can always find an uptrend, even in a really crappy bear market

I bought NEU in July 2022 after a volume pop that indicated a price breakout might be about to occur, which it did a few days later, so I bought some.  Its now a 2 bagger for me in under a year - which is why I find sticking around in stocks that are going nowhere fast, in the hope that one day the share price might recover, is a giant waste of time.  Time really IS money.

The most recent breakout was a signal to buy more as the trend gains even more momentum (but alas I did not).  It most likely will pull back from here at some stage, stocks don't like to get too far from that 13 day MA.



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[BlackPeter]

Here's a good example of how you can always find an uptrend, even in a really crappy bear market

I bought NEU in July 2022 after a volume pop that indicated a price breakout might be about to occur, which it did a few days later, so I bought some.  Its now a 2 bagger for me in under a year - which is why I find sticking around in stocks that are going nowhere fast, in the hope that one day the share price might recover, is a giant waste of time.  Time really IS money.

The most recent breakout was a signal to buy more as the trend gains even more momentum (but alas I did not).  It most likely will pull back from here at some stage, stocks don't like to get too far from that 13 day MA.



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Good advice, though I assume you hope it doesn't roll up its toenails on the way up. Some companies do ... and TA does not seem to help in this case.

Just try to remember the name of this flash and momentum driven company which crashed some years ago for some simple accounting mistakes (well, some might have called it fraud) - but can't ... too many companies to come and go.

[KW]

Good advice, though I assume you hope it doesn't roll up its toenails on the way up. Some companies do ... and TA does not seem to help in this case.

Just try to remember the name of this flash and momentum driven company which crashed some years ago for some simple accounting mistakes (well, some might have called it fraud) - but can't ... too many companies to come and go.

We're in a bear market so it pays to take some of your profits off the table along the way, or otherwise you may end up giving them all back.  Bull markets are so much easier, boy I miss it LOL

BIG and ISX were the ones that exploded into oblivion.  As they say, the market teaches expensive lessons.  I lost it all on BIG but didnt make the same mistake twice with ISX (although I only sold half at the first whiff of trouble then still got stuck with the other half as the ASX suspended them, although I was still well in the money just from the sale of half).  You do have to sleep with one eye open with the small caps.