Technical Analysis: 29 October 2018

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
29 October 2018, 8:22 AM

S&P/ASX 200 (XJO) – at critical support

The XJO has been trading in a downward trajectory since August 2018, declining from a high of 6373 to a low of 5624, declining 11.70% in less than two months. The selloff accelerated last week and our downside target of 5790 has now been reached.

Friday’s price action broke on an intra-day basis below key support of 5629 showing that the market is in a very fragile state. A decisive break on a closing basis will confirm that the index is entering a bear market territory, which could trigger further weakness in the months ahead with potential target of 5250. The daily RSI indicator has deteriorated significantly and has entered a bear market range.

Therefore, the current 5 wave decline is likely to be part of wave (1) of a larger degree, which means a strong rebound (wave 2) is likely to take place soon. The initial upside target for wave (2) is 5900. We will be monitoring very closely how the index trades around its key support of 5629 and provide an update in due course. 

QUBE Holdings (QUB) – approaching support

In our last update on August 31, 2018 we discussed the likelihood of the price declining in the near term and recommended clients take profits at $2.73. A strong decline has unfolded over the past two months and the current price action is approaching its key support of $2.13 where support appears solid and is likely to hold. While the stock is oversold and in accumulate territory at present our ideal entry is around $2.20.

The potential upside price target is $2.45. 

Aristocrat Leisure (ALL) – approaching support

The up trend from the September 2011 low appears to have lost momentum and the price has been trading in a correction mode over the past three months. The weekly RSI indicator broke below its long term bull market support suggesting that the price is likely to take a breather.

Although the stock is oversold on a daily basis we believe that further weakness to $24.00 is likely to unfold in the near term.  

Origin Energy (ORG) – in a down trend

ORG has been trading in a downward trajectory since July 2018 which is still technically intact. The recent price action broke below key support of $8.27 suggesting that the stock has entered a secondary down trend.

The potential medium term downside price target is $6.20. In the short term, the price is likely to bounce as it is oversold on a daily and weekly basis however resistance is likely to be encountered around $7.90. 

Smartgroup (SIQ) – bearish breakout

SIQ has been trading in a primary up trend which now appears to be reversing direction. The recent price action broke below key support of $10.87 confirming that a large top is now in place. The RSI indicator broke below its bull market support suggesting that lower prices are likely to unfold over the medium term.

The potential target based on the breakout is $9.00. Although the stock is oversold on a daily and weekly basis the ensuing rally is likely to be corrective in nature and be followed by more weakness in the months ahead. 

More information

Morgans clients can login to view all recent technical analysis on companies we cover by browsing the research section and filtering by 'technical analysis' in the Market Updates section. If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer: 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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