Technicals | Dec 11 2018
By Michael Gable
Yesterday was the low and the Santa rally starts today. We wish we could say that with certainty but it is actually starting to look plausible. There have been some false starts as last week, it looked as though the rally was about to happen. But we need to go back to our comments from a few weeks ago: "we are of the view that a dip under 5,600 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".
Where many commentators see a dip under 5,600 being a big problem for markets and the US being on the brink of recession, it probably means we are in that "peak fear" stage, and the opposite to consensus is the big risk here. That is, we are not going into a recession and markets are going to rally.
Production cuts by OPEC should result in some very nice upside here for energy stocks. Woodside Petroleum (WPL) is the obvious choice right here, but we also have an updated chart of Santos ((STO)) this week for those looking at a bit more bang for their buck.
Our recent commentary two weeks ago noted that the stock had hit support and was looking oversold. Our view was that "there is a good chance that STO bounces from here" and "investors may wish to tentatively buy STO here with a view to top up if it fills the gap". With STO now finding good support off this level, it now looks like it won't fill the gap. More conservative investors may wish to see it make a "higher high" by first pushing through $6. Beyond that we expect resistance to come in near $6.50, and the next level above that is close to $7.
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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
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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