Australian stocks to watch

Australia’s ASX index is at a key point, according to the technical charts. There has been a big decrease in short positions on individual stocks over the week, while analysis of momentum suggests Incitec Pivot and APN News and Media are two stocks to keep an eye on.

Trader outside Australian stock exchange
Source: Bloomberg

Last week, the ASX managed its highest close since mid-August at 5372. It twice reached intraday highs above 5400, but failed to close at these levels. The candlesticks for these days –  Wednesday and Thursday – have formed textbook reversion dojis, a pattern showing a large intraday rally (reflected by the line) but, comparatively, a very weak close (reflected by a squat bar). If the ASX does begin to roll over, the 20-day moving average is going to be a key support level. A close below 5270 would be a key signal that a sharp reversal could be imminent.

20-day moving average

Aveo Group and Caltex have seen the biggest increase in short positons over the past week, but in general there has not been a massive increase in shorts.

Week on week increase in short positions

There has been a noticeable decrease in in short positions over the week. Saracen Mineral, the small gold miner, saw positions decrease dramatically, while Southern Cross Media also saw shorts covered as it signed an affiliate deal with Nine Entertainment. The continued gains from Smiggle’s introduction into the UK have seen shorts pile out of parent company Premier Investments.

Week on week decrease in short positions

Incitec Pivot’s earnings report last week was much better than the market expected, suggesting the worst of the earnings declines may be over. The company, which produces mining explosives, managed to close above key resistance at A$3.32 on Friday and momentum could carry it to its technical target of A$3.70.

IPL closes above resistance

APN News and Media’s stock has rallied strongly, after it said it would spin off New Zealand business NZME. Ahead of the demerger APN launched a rights issue to pay down debt, which saw the shortfall book build clear at A$0.65 much higher than the A$0.53 offer price. The momentum behind the stock should carry it to its technical target of A$0.74, but a close above this level could see it continue to move higher.

Significant increase in volume traded

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