Angus Nicholson for Chris Weston, Chief Market Strategist at IG Markets
IG’s ASX Momo Report
The technicals do look to be lining up behind the ASX to support it heading higher after last week’s performance. The ASX managed its first close above 5400 since 12 August on Friday, a hugely significant psychological level for the market. Our market internals indicators are showing that the move has been widely supported by a range of companies, showing that there is significant market breadth behind the move. While valuations are looking stretched, the technicals are pointing higher in a week that will be buffeted by the release of a range of economic data.
Despite Pacific Brands (PBG) agreeing to a A$1.15 a share buyout from US-based HanesBrands, short positions in the stock saw the biggest rise in the index over the past week. Orora, the packaging company, also saw a noticeable increase in short positions. And the rise seen in Woodside and Caltex may indicate growing investor caution as the spot oil price struggles to break above US$50.
After seven straight days of declines, investors have started closing their short positions in APO. Westfield’s (WFD) past week of gains also looks to have cooled the bears as they closed out a lot of short positions.
Top momentum picks:
Whitehaven Coal (WHC) has been enjoying the bounce in coal prices since April, and even though spot prices have pulled back from their highs they look to be stabilising at substantially higher levels than earlier in the year. WHC has decisively broken above the A$0.80 level, and it looks like it has the momentum to see it test the A$1.00 level. Analyst view: 8 buy/2 hold/3 sell.
Asaleo Care (AHY), which manufactures a range of personal care and hygiene products, is still very much in an uptrend. It failed to close above A$2.10 on 19 May, but its stock price surged over 2% on Friday and it looks primed for a retest of A$2.10 this week. Analyst view: 2 buys/3 holds/1 sell.
Regis (REG) is still stuck in a downtrend. After bouncing off the A$4.65 level, it has been rejected at the A$5.06 level. The stock is looking increasingly hemmed in by its 50-day moving average and there’s a good chance it pulls lower again. Analyst view: 2 buys/5 holds/1 sell.
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