Technical update: 16 October 2017

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
16 October 2017, 9:34 AM

Telstra Corporation (TLS) – short term bounce

TLS has been trading in a down trend over the past year which is still technically intact. Bullish divergences between the price, the RSI and the MACD indicators have formed over the past month, suggesting that the price could bounce in the month(s) ahead. The potential upside price target is $3.75. Over the medium term, levels to $3.90 are achievable.

In the very short term, the price may experience a mild pull back but given the strongly oversold weekly readings we favour a three wave bounce from support of $3.37.

Baby Bunting Group (BBN) – accumulate

BBN has been trading in a down trend since September 2016 which is still technically intact. The down trend has lost momentum over the past four months and the price has been consolidating within the boundaries of a symmetrical triangle, which shows a great deal of indecision among market participants. The latest short term down swing has retraced to its dynamic support of $1.65 where buying interest is likely to arise. The momentum indicators have approached oversold territory pointing to a likely bounce in the short term. The potential upside target is $1.85.

Overall, we see the latest consolidation as part of a large basing pattern, therefore we are comfortable accumulating the stock at current price levels.

Sims Metal Management (SGM) – accumulate

SGM has been trading in an up trend over the past year which is still technically intact. The up trend has lost momentum over the past three months and the price has been consolidating between $12.57 and $16.35. The current short term down swing has approached its static support of $12.57 where initial buying interest is likely to arise. The RSI and the MACD indicators are close to oversold territory suggesting that the price is likely to bounce in the short term.

The initial upside price target is $14.60. Over the medium term, levels to $15.40 are achievable.

Bluescope Steel (BSL) – bullish breakout

BSL has been trading in an up trend over the past year which is still firmly intact. The decline from August 2017 has lost momentum over the past month and the price has been trading sideways, fluctuating between $10.61 and $11.99. Friday's price action broke above minor resistance of $11.99 suggesting that the correction is likely to be over. 

The initial upside price target based on the breakout is $13.60. Over the medium term, levels to $14.00 are achievable.

Structural Monitoring Systems (SMN) – high conviction buy

SMN has been trading in a down trend over the past year which now appears to be reversing direction. The higher lows and the higher highs on the daily chart is an encouraging sign showing that buying pressure is building up. The current pull back retraced to its previous support of $1.18 where initial buying interest is likely to arise. The down trend line on the RSI indicator has been broken upwards suggesting that higher prices are likely to unfold in the near term. The MACD and the stochastic indicators have turned positive from oversold territory, pointing to a likely bounce in the short term.

The first potential upside price target is $1.65. Over the medium term, higher price levels are achievable.

More information

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Disclaimer(s): Analyst may own shares in some or all of the companies mentioned.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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