Technical analysis: 16 July 2020

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
16 July 2020, 10:37 AM

Dow Jones Industrial Average – Improvement in momentum

The up trend from the March 2020 low took a breather over the past month and the index has been trading sideways, fluctuating between 24,843 and 27,850. The minor resistance of 26,661 has been breached overnight and the June gap is now filled.

Despite the RSI indicator breaking below its up trend line, the readings since March are above 40% and are still in the bull market range.

The small consolidation in the RSI has been broken upwards on Tuesday, showing that momentum is improving in the short term and that the index is likely to follow.

This suggests that a re-test of 27,850 is likely in the short term and is the key level to monitor in the week(s) ahead, as a decisive break above it will signal a re-test of the all-time February high.

Although at this point there is no sell signal on the chart, we will treat any further strength from here with caution as the weekly and daily momentum indicators are approaching overbought territory.

S&P/ASX 200 – Ready to breakout

The secondary up trend from the March 2020 low has lost momentum over the past month and the index has been trading sideways, fluctuating within the boundaries of an ascending triangle.

The pattern is characterized with lower highs and higher lows and is associated with indecision among market participant.

The current price action is approaching the pennant of the triangle and implies that a breakout is imminent.

The short term stochastic indicator has turned up from oversold territory and we favor an upward breakout.

The RSI indicator remains above its 40% bull market support showing that the secondary up trend is intact at this point.

The initial upside target based on the anticipated breakout is 6,300.

Copper – Improvement in momentum

In our last update on the 26th of June 2020 we discussed the likelihood of the price trading higher and our price target of US$3.00 has now been reached.

The weekly RSI indicator has broke above its bear market resistance suggesting that higher prices are likely to unfold over the medium to long term.

A subsequent break above key resistance of US$3.00 is highly likely and will confirm the continuation of the up trend.

Therefore, we lift our medium term price target to US$3.30. In the short term, the red metal may experience a mild pull back as the daily and weekly momentum indicators have reached overbought territory.

Such potential pull back is likely to be short lived.

Bapcor (BAP) – Short term rally

The secondary up trend from the March 2020 low has lost momentum over the past month and the price has been trading sideways, fluctuating within the boundaries of an ascending triangle.

The pattern has bullish implications and suggests that higher price levels are likely to unfold in the coming weeks.

The stochastic indicator has turned up from oversold territory suggesting that the price is likely to bounce in the short term.

The first potential upside price target is $6.20.

A subsequent break above resistance of $6.24 would confirm the pattern and signal an extension of the rally to $6.60.

Aurizon Holdings (AZJ) – Short term bounce

The secondary up trend from the March 2020 low has lost momentum over the past month and the price has been trading sideways, fluctuating between $4.53 and $5.07.

The current short term down swing has retraced to its support where buying interest is likely to arise.

The stochastic indicator is turning up from oversold territory suggesting that the price is likely to bounce in the short term.

The initial upside price target is $5.00, however this level could be exceeded.

Given the proximity to support and the oversold stochastic readings, we are comfortable to buy the stock at current price levels.

More information

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Disclaimer: Analyst may own shares. 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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