Summary:
- IT Services and Specialty Retail continue to gain strength. Software had a tough week inline with global sell off in tech.
- Strong action in Banks on Friday due to new credit reforms.
- Top 3 picks: Data#3, Elders Ltd, Temple & Webster Group.
Leading sectors:
IT services: +2.2%, continued on an uptrend
Specialty Retail: +0.6%, continued on an uptrend
Software: -1.5%, took a beating with the global risk off in tech. Can expect this to stay choppy unless the trend is established again.
Metals & Mining: -3.8%, the sector had some huge winners since July but came off last week as commodities sold off given the USD strength. I am medium term bullish on the sector given the fear of stagflation still persists. A lot of miners are small cap companies but have good institutional level liquidity. Will write about those in the next post if there are good setups.
Lagging sectors:
Banks: +3.8%, based on the “Consumer Credit reforms” that came out on Friday. These are not legislated yet, but look marginally good at the outset. It tackles the 1st line item of bank’s income statement i.e. extending more credit, hence more revenues. Still needs to be seen how the asset quality and provisions will be impacted in these reforms. (Link here)
Chemicals: -2.8%, continued on a downtrend
Top picks:
1) Data#3 (DTL.AX): undercut the previous base breakout and now giving a low risk entry (SL: AUD 6.14)
(Mkt cap: 994mm, avg volume: 600k shs)
2) Elders Ltd (ELD.AX): broke out of base last week and seems ready to go higher. (SL: AUD 10.55).
(Mkt cap 1.68bn, avg volume 670k shs)
3) Temple & Webster Group (TPW.AX): strong trending name, can start a small position with SL @ AUD 10.75.
(Mkt cap: 1.37bn, avg volume: 970k shs)
Risk Management: Stop loss levels have been posted in case anyone would like to buy the stocks. Needless to say, it is paramount to preserve capital to be able to play the next game.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: This is not investment advice, please do your research before committing capital.