Technicals | May 27 2020
Bottom Line 26/05/20
Daily Trend: Up
Monthly Trend: Down
Support Levels: $0.56 – $0.49
Resistance Levels: $2.20
Reasons to remain bullish long-term:
→ Online growth is stronger than its peers.
→ Excess inventory and a lower AUD could put pressure on gross margins in the first half of FY21.
→ The shift to online shopping should help re-base rental rates.
→ Heading higher from a solid zone of support.
Accent Group ((AX1)) trends very well when it’s in the mood. It is a double-edged sword though. The leg higher from the early 2017 lows was about as good as it gets. On the flipside, the decline that commenced at the end of February this year was parabolic. The stock has suffered more than most following the recent decline in equity markets. The end result was a retracement of more than 75% to the recent pivot low. As with most stocks we cover, a strong bounce has been unfolding since mid-March.
We concentrated on the weekly chart last time as it showed some good patterns. It’s always important to know where the smaller degree patterns fit within the larger ones. Another big positive on the weekly chart is the rejection from a multi-year zone of support. The significant low around $0.60 also locked in a larger degree wave-(2) or-(B).
The daily chart here shows impulsive price action higher off the mid-March lows. Ideal from an Elliott stance, irrespective of whether wave-(3) or-(C) is unfolding. Although the latter is part of a corrective pattern it should still be clean and strong. It should also subdivide into 5-waves. It’s early days in the bigger scheme of things but so far so good.
Volume attributes are also positive. Like many companies, a large-volume bubble occurred on the run to the low in March. It’s remained above average during the rally, albeit it has tapered off slightly. The declining volume during the formation of the triangle is ideal.
The headline pattern here is the ascending triangle. Price tried to break through the upper boundary today but failed by a small margin. A push above today’s high in a move that sticks is now required. Bigger picture the current leg higher should still be in its infancy.
The small ascending triangle provides an opportunity. The strategy is to buy following a push above today’s high at $1.325. Place the protective stop just beneath the apex of the triangle at $1.15. Use a trailing stop to manage the position. I’m making a formal recommendation.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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