Australia’s ASX looks well supported

The ASX rally looks to be well supported on the technical charts, even though valuations are looking stretched. Whitehaven Coal, Asaleo Care and Regis all have momentum.

Source: Bloomberg

The technicals are lining up behind the ASX, supporting a move higher after last week’s strong performance. The ASX managed its first close above 5400 since 12 August on Friday, a hugely significant psychological level for the market. Market internals indicators are showing that the move has been widely supported by a range of companies, showing that there is significant market breadth behind the move. While valuations are looking stretched, the technicals are pointing higher in a week that will be buffeted by the release of a range of economic data.

ASX chart

Pacific Brands agreed to a A$1.15 a share buyout from US-based Hanesbrands, but short positions in the stock saw the biggest rise in the ASX index over the past week. Orora, the packaging company, also saw a noticeable increase in short positions. And the rise in short positions in Woodside and Caltex may indicate growing investor caution as the spot oil price struggles to break above US$50.

ASX week on week chart

After seven straight days of declines, investors have started closing their short positions in APN Outdoor. Westfield’s past week of gains also looks to have cooled the bears as they closed out a lot of short positions.

ASX week on week decrease chart

Top momentum picks:

Whitehaven Coal has been enjoying the bounce in coal prices since April. Even though spot coal prices have dropped back from their highs, they look to be stabilising at substantially higher levels than earlier in the year. Whitehaven’s stock has decisively broken above A$0.80, and it looks like it has the momentum to see it test A$1.00. Currently, eight analysts have the stock at buy, two at hold, and three at sell.

WHC chart

Asaleo Care, which manufactures a range of personal care and hygiene products, is still very much in an uptrend. It failed to close above A$2.10 on 19 May, but its stock price surged over 2% on Friday and it looks primed for a retest of A$2.10 this week. Two analysts have the stock at buy, three at hold, and one at sell.

AHY chart

Regis is still stuck in a downtrend. After bouncing off A$4.65, it has been rejected at A$5.06. The stock is looking increasingly hemmed in by its 50-day moving average and there’s a good chance it pulls lower again. Currently, two analysts have the stock at Buy, five at Hold and one at Sell.

REG chart

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