Research: Technical Strategy and Perspectives (04 - 08 January 2021)

-

Good Day All, 

This week's research note is shorter than usual. For a sample of my standard weekly reports, please click on the following link to view the standard coverage: https://re-rate.blogspot.com/2021/01/research-coverage-samples-of-research.html 

Full sample reports will be uploaded to this blog in the next few days.

Please note, this is not a comprehensive view of potential market opportunities on my watch-list.

All Charts and Data as at the close of Thursday 31 December 2020.

 

All Country World Equity Index (ACWI, $90.72) | As we kick off 2021, global equities trade at all-time highs, having made one of the strongest trough-to-peak recoveries in recent years, rising by 70% off the March 2020 pandemic lows to the last trading day of 2020. At current levels, the index exhibits a strong candle structure, with a +3.88% gain over 1 month, which followed an 11.76% gain for November 2020. While the primary trend is up and strong, traders and investors should bear in mind the price approaching the channel trend line resistance extending back to 2008. As can be seen from the attached monthly chart, this trend line resistance saw the price pause for a period of consolidation. It should however be note that a 'pause' will only potentially be confirmed once global equities encounter a negative month in terms of price performance. Chart Link: https://www.tradingview.com/x/kwbhkwsm/ 


JSE All Share Index (J203, 59408) | The index has been in a short term upward trend which has included periods of sideways consolidation. With the bullish advance, traders have been guided by a rising 20-day exponential moving average above a 'flat' 200-day simple moving average i.e. short term bullish, medium neutral. In the first period of short term consolidation (09 Nov to 01 Dec 2020) we note the price holding above but not testing the 20-EMA while the second consolidation phase (03 Dec to present) saw six tests of the 20-EMA which may have indicated that the short term bullish momentum is waning. Currently we know that the 60000 level is acting as a resistance zone with the price having traded above it, then broken below, followed by a 're-test' on Wednesday 30 December. On both the bull and bear side, which levels should traders monitor? Bull: 30/12 open of 59874; Bear: 31/12 low of 58994. Chart Link: https://www.tradingview.com/x/5Zpsm6Ov/ 


Shanghai Composite - China's main index has done relatively little over the last 5 years with the current price below its December 2015 highs. At current levels, we note the development of a base formation which if breaches and closes above 3580 on a monthly basis, would see a commencement of a new trend and a continued rebound off the 26-year channel trend line. With the current setup, we also note similarities to September 2006 and November 2014 where a breach of the multi-year downward trend line (within the long-term upward channel) led to sharp advances in the subsequent years. I'm quite excited about this chart and over the next few weeks I'll drill down for individual stock/sector opportunities. https://www.tradingview.com/x/eTDbbop4/


Berkshire Hathaway (BRK.B, $231.87) | The share trades just 1.3% off both it's 52-week and all time highs however at the same level it did exactly one year ago. Visually, the medium term setup is constructive with the technical price structure suggesting that buyers may be eager to push the price through the $235 level - an area where sellers have held their ground. Most recently we saw the price bound off the pivot while the previously flat 200-day simple moving average has started to turn up - one of the first signs of a potential upward swing in momentum. Chart Link: https://www.tradingview.com/x/BRJmD3ud/


Union Pacific Corp (UNP, $208.22) | UNP is setting positively above it's 200-day moving average with the price breaking to the upside of a bull flag technical formation. This advance follows the price consolidating on it's pivot. What also attracts me to the setup is not only the technical indicators being in a bullish regime but the price not trading too far above it's 200-day simple moving average. (I know it's often said that a flat 200-day SMA can be frustrating however I view a flat 200-d as the basis for the share's next move, provided the candle structure and technical indicators align.) Chart Link: https://www.tradingview.com/x/vPqRkcoJ/


Comcast Corp (CMCSA, $52.40) | Daily Chart Comcast is another name trading close to all-time highs but not too extended from it's 200-day simple moving average. Having traded in a sideways consolidation phase from 24-November to 30 December, we have seen the price break to the upside of this tight trading range and continuing it's advance above the short term 20-day EMA. From a swing trading perspective, the setup is attractive where traders could look to take a buy/long at $52.40 or better, using a stop loss of $49.55 and where upside targets are: (i) $56.30 and (ii) $59.37. Chart Link:
https://www.tradingview.com/x/gaGki7V8/  


Lion's Gate Entertainment (LGF.A $11.37) | Following the development of a 17-month base, LGF.A is looking to make a bullish reversal as it breaks to a new 17 month highs above it's 30-week moving average which is starting to turn up. This can be seen on the weekly chart where at the current print of $11.37, the Relative Strength Index is in a bullish regime (print above 60) while the MACD Level and Signal lines have crossed back above zero after trading in negative territory from April 2018 to August 2020. Chart Link: https://www.tradingview.com/x/n7YGgK5C/


ABB Ltd (ABB, SEK229.00) | Monthly Chart | With a market cap of SEK480bn, the company operates in an attractive sector (i.e. robotics, power, heavy electrical equipment and technological automation). Reviewing the month chart, we note the price having been relatively flat over the past 13 years, trading between an average of SEK135 and SEK200. The most recent level sees the price attempting to break above a 3 1/2 year overhead supply zone which would propel the share to new all-time highs.    

 

Dell Technologies (DELL, $73.29) | Monthly Chart | The share's post-IPO overhead supply has been absorbed with price now trading above the swing highs of May 2018 when the share tested $70.55. While we have seen a strong move off the March lows, we also view the current level as being key for further advancement where the prior supply zone may potential turn to support and act as a base for higher levels. Taking out the lows of December 2020 ($69.06) would suggest temporary failure. https://www.tradingview.com/x/a4dEds5B/  


T Rowe Price (TROW, $151.39) | Daily Chart | Prior resistance turning to support is a characteristic of bullish price action. Here, we note the $148 level having absorbed the overhead supply with the price bouncing off this level and also attempting to clear 'resistance level 1'. We also note the short term downward trend line resistance being cleared while the price trades above a rising 30-day EMA. This bullish setup is negated below $147.80. Chart Link: https://www.tradingview.com/x/4S6zkulC/


Johnson & Johnson (JNJ, $157.38) | Weekly Chart | JNJ is current moving to the upside of a 3-year consolidation phase and breaching the resistance range with an average of $155. At the close of 2020, the stock closed at $157.38 with the 14-period RSI trading just below the 60 level (bullish bias). We now look for the $155 level, which was previously resistance, to become support. Chart Link: https://www.tradingview.com/x/IkK9ioGw/ 


Medical Devices Stocks - On 15 December via social media, I highlighted the chart of Medtronic Plc at $114.71, having noted the breakout of a pennant formation. Since then the price has advanced by just under $3 and continues to trade well. I then decided to review some of MDT's peers and note similarly healthy setups in Stryker Corp (SYK, $245.04), Abbot Laboratories (ABT, $109.49) and Edward Lifesciences Corp ($91.23). 




 
 
Las Vegas Sands (LVS, $59.60) | Daily Chart | The stock has been consolidaing in a sideways range (above the pivot) for nearly 2 months however over the last few sessions we have seen the price trade into the upper boundary of the range, which may suggest that there is a willingness for buyers to push the price above the overhead resistance of $60.45. The stock also trades above it's 200-day SMA while both the 7 and 14-period RSI's are in a bullish regime. Nice little swing long setup building here. Temporary failure below $57.10. Chart Link: https://www.tradingview.com/x/dThVItVV/

 


Platinum - On a long-term basis, the metal continues to improve, having broken it's 4-year consolidation base and trade at a 4-year high. Despite the recent strong move, the positioning of the technical indicators suggest a strong but not overbought condition. Here's what I mean: The 14-period RSI trades at 61 (now at a 9-year high) and is trending up. Typically, we would consider a reading of +80 as nearing overbought territory. We also note the MACD starting to reclaim the zero bound after trading below this level since December 2012. The $1000 level has also been a key psychological level which was previously resistance and is now looking to turn to support. A re-test and rebound off $1000 would be technically constructive. https://www.tradingview.com/x/heEFdERB/


 Lester Davids

Twitter: https://twitter.com/_Lester_Davids

 

Comments

Post a Comment

Popular posts from this blog

Hits & Misses 2018

-
Image
How does an individual who earns his or her living from financial services and/or the financial markets maintain complete humility when they feel they have done well or out-performed? When a plumber, doctor, dentist or IT professional expresses that he or she has the ability to do a good job the reaction expressed is somewhat different than the sometimes "who-does-he-or-she-think-he-is?" reaction a financial services professional receives.  It's on that note I start this brief piece called "Hits & Misses 2018" - an attempt to highlight ( through the calls made ) how my think and analysis has developed, why I believe 2018 was a very good year, as well as where I failed. If you are reading this we most likely follow each other on Twitter or are connected on Linkedin or you may have otherwise come across my post online. The ideas highlighted form part of my roll as an researcher/analyst at a Johannesburg-based retail stockbroker where I am responsible f...
Read more

Using Technical Analysis As A Risk Management Tool: 4 Examples

-
Image
I happened to be online last week, following some of my global peers and again noticed something that has been a recurring feature: even the most experienced and well-respected technical analysts still have a tough time in selling the discipline as a viable tool in financial markets. Yes, there are are myriad of ways to make money in the market, which includes Fundamental, Quantitative, Quantamental and many more but when it comes to technical analysis there is often a great deal of doubt that the outcome is less reliable than most other forms of analysis. Peter Brandt, who has been in the business for 45 years is one of the gentlemen who has been successful but is still doubted, while J.C Parets, who services hedge funds and other institutions ofetn describes how thought of as 'voodoo' by the rest of the market. One of my acquaintances who previously traded at a large boutique asset manager and now works as a hedge fund manager, describe to me how Technical Analysis is con...
Read more