Technical Analysis: 7 January 2021

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
07 January 2021, 8:00 AM

Orocobre (ORE) – Target reached

In our last update on the 26th of November 2020 we discussed the bullish structure of the weekly momentum indicators and the likelihood of the price breaking above resistance of $3.96.

The rally from the November 2020 low has extended further as expected and our second upside price target of $4.80 has now been reached and exceeded.

The current price is close to its previous key resistance of $5.05 where initial selling pressure is likely to arise.

The weekly RSI indicator has reached overbought levels suggesting that the price is likely to pull back soon.

A bearish divergence between the price and the daily RSI indicator has formed over the past month showing that momentum is deteriorating.

Although at this point there is no sign of reversal of the primary up trend, given the proximity to previous multiple resistance and the overbought and divergent momentum readings, we are of the view that the rally is likely to take a breather.

Active clients may consider lightening positions.

WH Soul Pattinson & Co (SOL) - Overbought

SOL has been trading in a strong up trend since March 2020 which is still technically intact.

The current price action has rebounded close to a band of previous key resistance between $31.23 and $31.87, where initial selling pressure is likely to arise.

The weekly RSI and MACD indicators have reached strongly overbought territory suggesting that the price is vulnerable to a pull back to unwind its overbought momentum conditions.

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

Given the proximity to key resistance and the overbought and deteriorating momentum conditions, we are of the view that the near-term upside from here is likely to be limited.

Reliance Worldwide (RWC) – Bearish breakout

RWC has been trading in a strong up trend since March 2020 which appears to be losing momentum over the past two months.

The recent up swing has rebounded close to its previous key resistance of $5.10 where selling pressure started building up.

The weekly RSI and MACD indicators have turned lower from overbought territory suggesting that the secondary up trend is likely to take a breather in the coming month(s).

The up trend line on the weekly RSI indicator has been broken downwards showing that momentum is deteriorating.

The support of $4.00 has been broken on Wednesday suggesting that further share price weakness could unfold. The potential downside price target is $3.65.

Ramsay Health Care (RHC) – Bearish breakout

The rally from the March 2020 low has lost momentum over the past six months and the price has been trading sideways, fluctuating between $61.21 and $70.94.

Wednesday’s price action broke below its key support showing that the sellers are becoming increasingly eager.

The support on the weekly RSI indicator has been broken showing that momentum is deteriorating.

Given the deterioration in the price and in the momentum structure, we are of the view that the price could decline further from here. The potential medium-term downside price target is $56.00.

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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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