Technical update: 26 February 2018

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
26 February 2018, 11:26 AM

Woolworths (WOW) – at resistance

The up trend from the July 2016 low has lost momentum over the past year and the price has been trading sideways, fluctuating between $24.45 and $27.92. The rally from the September 2017 low has re-visited its key resistance where initial 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 rally is likely to take a breather.

Given the proximity to key resistance and the overbought and diverging momentum conditions, we believe the price will take a breather in the month ahead.

CSL Ltd (CSL) – target reached

In our last update on February 15, 2018 we discussed the implications from the breakout and the likelihood of the price trading higher in the short term. A strong rally has unfolded over the past week and our initial upside price target of $160.00 has now been reached. While at this point there is no reversal signal on the chart, we note that the stock is entering overbought territory, which means it is vulnerable to a short term pull back.

Over the long term, the outlook remains positive but at this point we wont be lifting our price target.

Villa World (VLW) – accumulate

In our last update on January 2, 2018 we discussed the overbought nature of the stock and the likelihood of the price declining in the short term. A strong pull back (more than 11%) has unfolded over the past month and now the momentum indicators are approaching oversold territory.

While at this point there is no clear sign that the correction is over, given the proximity to oversold momentum levels, we are comfortable accumulating the stock at current prices. The potential upside price target is $2.75.

Nanosonics (NAN) – double blessed buy

NAN has been trading sideways over the past four months, fluctuating between $2.41 and $3.05. Friday's price action declined to its key support where strong buying support emerged. Although the momentum indicators are not in oversold territory yet, we would be looking to open long positions between $2.40 and $2.50.

The potential upside price target is $2.80.

The a2 Milk Company (A2M) – overbought

A2M has been trading in a strong primary up trend which is still firmly intact. The stock has gapped up strongly last week and the price posted a record high of $13.78. The momentum indicators have reached strongly overbought territory, suggesting that the price is likely to take a breather in the months ahead and is vulnerable to a pull back in the short term.

Although at this point there is no reversal signal of the primary up trend, given the strongly overbought momentum conditions, active traders may consider trimming positions.

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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