Angus Nicholson for Chris Weston, Chief Market Strategist at IG Markets
A momentum trader’s view of the ASX
The ASX 200 seems fairly comfortable in a 5300 to 5400 range and a focus on the daily chart shows the 20-day moving average starting to flatten out. If we hone in to the two hour chart (below) we can better see the bids coming into the market around 5300 since 9 May (as circled). There was a brief period last week where price moved through support, but the buyers have stepped back.
All-in-all, happy to stay neutral on this index, turning more bearish on a convincing break of 5250 and even more so 5200. A closing break above 5334 (the 38.2% of the recent sell-off) would be positive and suggest a stronger rally into 5400 and the top of the range.
The forward price-to-earnings ratio for the ASX pulled back a bit from its extremes last week, but this was fully driven by the pullback in the index from the 5405 level to 5320.
Momentum Picks
ASX Limited (ASX) released their monthly activity report on Friday and showed a 23% increase in year-to-date cash market volume compared to last year. This helped it finish the week up 3.1% on the week and close above its key resistance level of A$45.00. If volumes continue at this pace throughout the year the stock is set for further gains.
Greencross (GXL) managed its highest close on Friday since 2 April 2015. The stock has continued in a steady uptrend since 26 April and looks set to continue higher. Despite sitting on quite a high forward P/E of 21.2, the analyst consensus is still very bullish on the stock with 4 buys, 5 holds and 0 sells. GXL, the pet care company, does not look like its heading for a Pets.com demise just yet.
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