Technical analysis: 25 September 2020

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
25 September 2020, 12:00 PM

AusNet Services (AST) – Approaching key resistance

AusNet Services (ASX:AST) has been trading in a strong secondary up trend since July 2020 which is still technically intact.

The current upswing is approaching its key resistance of $2.02 where initial selling pressure is likely to arise.

The weekly and daily RSI indicator readings are close to overbought territory suggesting that the near-term upside from here is likely to be limited.

A small bearish divergence between the price and the RSI indicator has formed on the daily chart showing that momentum is deteriorating.

Although at this juncture in time we don’t see a reversal of the rally, given the proximity to key resistance and the overbought and deteriorating momentum conditions we are of the view that the rally is likely to take a breather soon.

InvoCare (IVC) - Accumulate

The primary down trend from the July 2019 high has lost momentum over the past six months and the price has been trading sideways, fluctuating between $9.07 and $12.12.

The current secondary down trend has retraced close to its key support of $9.07 where initial buying interest is likely to arise.

An equal low appears to forming on the daily chart showing that the buyers are stepping in. The medium-term down trend line marked with red in the chart below has been broken upwards showing that the decline is losing momentum.

A small bullish divergence has formed on the weekly chart suggesting that the price is likely to bounce in the short-term. A subsequent break above minor resistance of $10.35 appears likely which is likely to trigger further share price strength in the coming months.

The potential medium-term upside price target is $11.50. Given the proximity to key support and the oversold weekly momentum conditions, we are comfortable to accumulate the stock around current price levels.

Australian Ethical (AEF) – High conviction buy

After posting a fresh all-time high of $9.07 in July 2020 a sharp decline to unwind the overbought and diverging momentum conditions took place.

The correction is clearly losing momentum and a higher low appears to be forming on the daily chart.

The medium-term down trend line marked with a blue line in the chart below has been broken upwards recently showing that the secondary downswing is losing momentum. The weekly RSI indicator has retraced to oversold territory suggesting that the price is likely to bounce soon.

The medium-term down trend line on the RSI indicator has been broken and a bullish inverse head and shoulders pattern appears to be forming on the daily chart.

Given the oversold weekly momentum conditions, the bullish pattern on the daily RSI indicator and the improvement in the price structure, we are of the view that the stock is close to a turning point. We see the current price levels as attractive to buy the stock.

The initial upside price target is $6.00. Over the long-term, levels to $8.00 are achievable.

Acrow Formwork (ACF) – Lifting our target

In our last update on the 17th of August 2020 we discussed the likelihood of the price trading higher in the near-term and our initial upside price target of $0.36 has now been reached.

The weekly RSI indicator has broken above its bear market resistance of 62% and is the first bullish development with long-term implications that occurred over the past three years. This suggests that the primary down trend is likely to reverse course and that higher prices are likely to unfold over the long-term.

The long-term down trend line on the price chart has been broken upwards recently, also pointing to a likely reversal of the primary down trend. The daily RSI indicator remains firmly in the bull market range suggesting that higher prices are likely to unfold in the coming months.

The price action over the past month has been consolidating within the boundaries of an imperfect ascending triangle, which suggests that an upward breakout is likely to occur.

Given the significant improvement in the weekly momentum conditions, we are of the view that the price is likely to trade higher in the coming year. Therefore, we lift our upside price target to $0.44.

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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