CSL: Hang In There

Technicals | Nov 28 2019

Bottom Line 27/11/19

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support levels: $232.69 – $227.34 / $173.00
Resistance levels: N/A

Technical Discussion

Reasons to remain bullish on CSL ((CSL)):
-Embarked on plasma expansion well in advance of its peers.
-Well positioned in a tight market for immunoglobulin.
-A greater ability to collect enough plasma to meet demand.
-15% sales growth feasible in FY20.
-Impulsive price action relentless.

There is nothing of interest on the daily chart due to the straight-line leg higher. Not ideal from a pattern perspective though obviously it's bullish. The weekly chart shows the interesting patterns, so we'll stick with it.

The headline pattern last time was the cup & handle which appeared to be in its latter stages. In fact, price had just broken through the upper boundary. This has triggered strong, clean price action and is ideal at this stage of the trend. Measuring the depth of the pattern and projecting it from the breakout provides our target zone either side of $300.00. This is now within touching distance.

Not surprisingly, price is looking overbought on both the daily and weekly timeframes. There's even a messy example of bearish divergence on both charts though it isn't proving to be significant. It's also the less potent Type-B variant. Unless price heads lower immediately, we'll monitor only. If we are to see a retracement it would be ideal for it to commence once price hits the target area. Nothing goes up in a straight line indefinitely meaning at some juncture we are going to get a pause or short retracement.

Brokers and analysts continue to like the company, with several reasons why mentioned above. It isn't everybody's cup of tea though. It ranks number 3 in the largest companies on the ASX 200 and has a massive share price. The potent trend is seen by many as being unsustainable. Eventually they will be correct though it's done a good job of proving them wrong over the years. Looking at the charts there's no reason to be anything other than bullish.

Trading Strategy

"…Although the Cup & Handle pattern triggered today an opportunity is still available. The strategy is to buy following a push up through today's high at $245.44 with the protective stop placed just beneath the prior pivot low at $227.00 providing a low risk entry. We'll look to take profits at $300.00, being the measured move out of the C&H…".  We are currently holding long positions from $248.00, as we did have some slippage. Yesterday we tightened the protective stop up to $237.00 to remove a large chunk of the risk. We'll try to get the protective stop to breakeven as soon as is practically possible. We'll stick with our target at $300.00. If you aren't already involved stand aside.

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CHARTS

CSL