Technicals | Feb 25 2020
By Michael Gable
With share markets taking their biggest hit since August last year, it is obvious that we will get some lower levels from here. A big drawdown often brings out the "end of the world" commentary, but it is simply a reminder that share markets don't go up in a straight line. It is always two steps forward, one step back.
With indices hitting record highs only a few days ago, the Australian market is therefore still in positive territory for the year, even at the end of today's expected bloodbath. The unknown is whether we continue to get a big decline such as that seen at the end of 2018, or we get a more muted pullback like the one seen in August 2019. That was when the "smart" analysts were calling for a recession, everyone was fearful, but it merely led to the market going sideways. No-one knows where the herd will take us in the short to medium term, so times like this are when it doesn't hurt to raise a little more cash with anything that is very sensitive to market gyrations, and keep the more stable, longer-term companies. When we identify the inevitable low in the market, it is always nice to have some cash on hand.
One sector that has been lit up in the last few days is gold. This week we revisit Newcrest Mining ((NCM)).
On 31 December when NCM was trading at $30.06, we commented that it seemed to have bounced off a significant level near $28 and should higher. It went backwards at the end of January, and most recently it seemed to break support at $28. However, it very quickly recovered and was back above $30 in a very short period of time. This means that the break of support at $28 was a false break (circled). That can be a bullish sign and strongly indicates that a low should now be in place. For now, we expect NCM to rally up towards resistance near $34; at which point we would have to reassess.
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
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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