More Upside For Costa?

Technicals | Nov 20 2018

By Michael Gable 

The S&P/ASX 200 Index is back into the support zone of about 5600 – 5800. We are now on track to retest the October low. However, the impulsiveness of the recent move down now makes us revise our shorter-term view. It is very common for the market to retest a low after a sharp sell-off. We have been warning that we usually need a month or two to pass before a market is ready to properly rally after a sharp sell-off. But in this situation, given the price action of last week, there is a good chance that we slightly dip under the October low in the next few weeks. We are of the view that a dip under 5600 would be "peak fear" for the current period and that would actually mark an end the current slide. It would lead to a strong bounce starting in December. However, if we are wrong, and the market struggles to bounce from a sub-5600 level, then it would set us up for lower levels again. But there isn't any evidence yet that that would happen and a retest and failure to bounce gives investors a second chance to reassess. For the moment, we are within striking distance of the next major low and investors should use these next few weeks to short-list opportunities.

Today we look at Costa Group ((CGC)).

A strong bounce in the last few days is telling us that CGC may continue to rally here. For the moment it looks like the recent decline has finished in three waves. But like most stocks, we need to see it overlap the start of wave 2 to be sure that we are not going to see it break the October low. That is, a push above $7.60 is confirmation that we have seen a 3-wave decline and that sets us up for much higher levels. Otherwise a failure below that would make us negative on the chart and that would result in a fall to levels under $6 again.

Content included in this article is not by association the view of FNArena (see our disclaimer).
 
Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services. 

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
 

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CGC