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On the daily chart I don’t think there is a more attractive stock for momentum traders to focus on right now. CSL closed above at a new 30-day high, at the top of the Bollinger band, it is above its five-day moving average and with all moving averages heading north, the trend is higher. The RSI (I’ve used the ten-day RSI) is not above 70; you could make an argument that the stock has further to run.
I am cautious on buying the stock at market as the hourly chart is overbought, with the RSI at extremes. The stock is at the top of its Bollinger band, which to me highlights the strength behind the trend, however I am keen to look at buying on weakness.
Fundamentally the stock is fairly valued, trading on 21.9x forward earnings, which is expensive relative to the rest of the market, but investors have been happy to pay up for the strong earnings profile. The stock is also trading on a 14.5% premium to its five-year average, so again this highlights a slight pullback could be on the cards.
The earnings profile of the company is still strong, with solid increases in profitability over the coming years.
In conclusion momentum is strong, however on the hourly chart I feel profit taking could materialise, but I won’t look to buy pullbacks to the mid-point of the Bollinger band.