S&P 500 – overbought
The S&P 500 has been trading in an upward trajectory over the past month which is still technically intact. Although the up swing is still intact, the RSI and the stochastic indicators are approaching overbought territory, suggesting that the index is vulnerable to a mild pull back in the near term.
The potential downside target in the short term is 2450. Over the long term, our view on the index remains positive and at this point we don't see signs of a reversal of the primary up trend.
S&P/ASX 200 (XJO) – lost for direction
The XJO has been trapped in its current trading range between 5629 and 5836 for more than three months. The price action over the past month has been in the lower half of the trading range. Applying simple distribution analysis shows that the sellers are gaining momentum and that the market is vulnerable to a pull back in the near term. The key level to watch is support of 5629 as a break below will signal an extension of the correction from the May 2017 high.
The potential downside target is 5425. Over the long term, our view on the index remains positive with a target of 6000.
ImpediMed (IPD) – gaining positive momentum
In our last update on September 18, 2017 we discussed the likelihood of the stock trading higher in the short term and the likely reversal of the long term up trend. The RSI has now entered the bull market range increasing our confidence that the stock is at a turning point. A break above resistance of $0.85 is highly likely with initial upside price target of $1.00. In the short term, the price is likely to experience a mild pull back as momentum indicators have reached overbought territory.
A potential pull back around $0.70 would provide a good buying opportunity.
Woolworths (WOW) – downside target reached
In our last update on August 24, 2017 we discussed the bearish implications from the completion of the head and shoulders pattern on the RSI indicator. The price declined over the past month as expected and our downside price target of $25.50 has now been reached. Although the MACD and the RSI indicators are now in oversold territory (which points to a short term bounce to around $26.00), we have noted deterioration in the weekly momentum indicators.
We see any bounce from here as short lived.
Villa World (VLW) – close to resistance
VLW has enjoyed a strong run since June 2017 which now appears to be running out of steam. Thursday's price action re-visited its band of resistance between $2.52 and $2.55, where selling pressure is likely to arise. A bearish divergence between the price and the RSI indicator has formed on the daily chart, suggesting that the price is likely to pull back in the short term. Thursday's price action is an imperfect key reversal pointing to weakness in the short term.
The potential downside price target is $2.30.
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Disclaimer(s): Analyst may own shares in some or all of the companies mentioned.
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