Technical Analysis: 6 March 2020

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
06 March 2020, 3:20 PM

Coles Group (COL) – Approaching resistance

COL has been trading in an up trend since March 2019 which now appears to be reversing direction.

The long term up trend line has been broken downwards recently showing that the trend is deteriorating. The RSI indicator broke below its bull market range showing that momentum is deteriorating.

The current V shape recovery is approaching a band of resistance created by the breakdown gap with short term resistance of $16.60 likely to re-new the selling pressure. While the stock may be enjoying a positive momentum in the short term, driven by fearful consumers stocking up essential non perishable goods, over the medium term, we are of the view that the stock is likely to continue to consolidate and trade sideways between $13.00 and $16.00.

Freedom Foods Group (FNP) – Bullish divergence

The decline from the September 2018 high has lost momentum over the past eight months and the price has been trading sideways, fluctuating between $3.90 and $6.00.

The current secondary down swing has retraced to its key support of $3.90 where initial support is likely to hold.

A bullish divergence between the price and the RSI indicator has formed over the past two months, suggesting that the price is likely to rebound in the short term to $5.00 - $5.10. Over the medium term, the stock is likely to continue to trade sideways, with $3.90 - $4.00 seen as a good area to accumulate.

Aristocrat Leisure (ALL) – Deterioration in momentum

ALL has been trading in an up trend channel since December 2018, which is still technically intact.

The current short term pull back retraced to its long term up trend line crossing at $32.00 where initial support was encountered earlier in the week and is the key level to watch.

The leading RSI indicator broke below the support of its bull market range showing that momentum is deteriorating. Given the bearish divergence that formed on the daily chart and the deterioration in the momentum conditions, we see a possibility of dynamic support of $32.00 being broken downwards in the short term. The initial downside price target is $30.00. 

BHP Billiton (BHP) – Deterioration in momentum

BHP has been trading in a primary up trend over the past four years, which started showing the first signs of deterioration.

The long term up trend line as shown on the weekly chart below has been broken during the February selloff, showing the price momentum is deteriorating. The key support of $34.42 has also been broken, confirming that a top reversal pattern is now in place.

The leading weekly RSI indicator broke below the support of its bull market range suggesting that lower prices could unfold in the coming months. The initial downside price target is $30.00. In the short term, the weekly and daily momentum indicators are oversold suggesting that the price is likely to rebound soon with a potential upside target of $35.00.

Westpac Banking Corp (WBC) - Oversold

WBC has been trading in a down trend over the past five years, fluctuating within the boundaries of a down trend channel.

The price encountered strong resistance at its long term down trend line crossing at $30.00 and has been trading in a downward trajectory over the past few months.

The current decline broke for a second time the neckline of the large head and shoulders pattern crossing at $27.00, showing that the price remains under selling pressure. While the stock is grossly oversold on a weekly and daily basis, we could see more downside in the short term, before a more sustained recovery takes place over the medium term. Static and dynamic support from the weekly chart arises between $20.00 and $21.00.

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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