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Technical update: 9 September 2017

Violeta Todorova

BHP Billiton (BHP) – short term weakness

BHP has been trading in a strong up trend since June 2017 which is still technically intact. The current price action re-visited its key resistance of $27.96 (which is also a dynamic resistance on the weekly chart), where initial selling pressure is likely to arise. The RSI and the stochastic indicators on the daily chart have reached overbought territory, suggesting that the price is likely to pull back in the short term. The potential downside price target in the weeks ahead is $26.00. While at this point there is no sign of reversal of the primary up trend, we are concerned with the heavy cluster of overhead resistance on the weekly chart, which suggests that some profit-taking might take place between $28.00 and $30.00.

Origin Energy (ORG) – approaching resistance

ORG has been trading in an up trend channel over the past two years which is still technically intact. The current up swing is approaching its key resistance of $8.04 where initial selling pressure is likely to arise. The RSI and the stochastic indicators are close to overbought territory, suggesting that the price is likely to pull back soon.

Overall, while at this point we don't see a reversal of the primary up trend and an overshooting to $8.50 is possible, the proximity to key resistance ($8.04 - $8.60) and the overbought momentum readings, we see the near term upside from here as limited.

Independence Group (IGO) – buy around $3.60

IGO has been trading sideways over the past four months, fluctuating between the boundaries of an ascending triangle. Tuesday's price action broke above its key resistance of $3.63 confirming that a new medium term up trend has started. The first potential upside price target based on the breakout is $4.42, however over the long term higher prices are achievable. In the short term, the price is likely to pull back as momentum indicators are in overbought territory. The potential short term share price weakness is towards $3.60 which we will consider as a great buying opportunity.

IGO has been one of the most shorted stocks on the market over the past few months and with the shorters being caught on the wrong side of the market we can see the price re-rating fairly rapidly.

Medibank (MPL) – overbought

MPL has been trading sideways over the past four months fluctuating between $2.63 and $3.05. The recent up swing has re-visited its key resistance of $3.05 where initial selling pressure is likely to arise. The RSI and the stochastic indicators have turned negative from overbought territory, pointing to a pull back in the short term.

The initial downside price target is $2.85. Over the medium term, our view on the stock is neutral and we expect to see further consolidation in the months ahead.

Galaxy Resources (GXY) – don't take off without me on board

The decline from the January 2017 high has lost momentum over the past three months and the price has been trading sideways, fluctuating within the boundaries of an ascending triangle. The pattern has bullish implications and suggests that buying interest if building up. GXY has been one of the most shorted stocks on the market for a number of months and a short squeeze can push the price rapidly higher. A break above resistance of $2.28 will confirm the pattern and trigger a rally to $3.00.

Any short term share price weakness in the days ahead would provide a good buying opportunity.

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.