Phat squiggly lines is where pro traders get a technical take on the stock markets – with Kieran Neeson, Opentrader's in-house trading guru.
The ASX 200 (ASX:XJO) has staged a solid recovery over the past few weeks and has rallied just shy of 3.5% since the low point reached in early October. It is now trading just above the 50-day moving average, which has been a technical level of support/resistance for the better part of this calendar year.
We are now sitting at a point of short-term resistance in the immediate term, so some consolidation/selling in the coming days would not surprise us. Overall, the market is still in an uptrend and has managed to shrug off several macro factors that could have easily pushed it lower. These macro factors (slowing of growth in China, Evergrande fallout, rising interest rates) are still very much on the cards. They are potentially significant in terms of their impact on equity markets, so we’re cautiously optimistic at present.
1 – Market now at short-term horizontal resistance
2 – Market has reached 50-day moving average which has been a level of support this year
3 – 50-day moving average acting as level of support
Zip Co (ASX:Z1P) is one of Australia’s largest BNPL providers and have been in a long term consolidation that dates back to May of this year.
The stock has been sitting on strong support for the better part of the past six months and is currently glued to the 50-day MA (moving average). While there is no clear buy signal based on the current technical picture, when stocks consolidate for a long time like Zip Co has, this can be a precursor to a significant breakout.
Our bias for this breakout is towards the upside based on a couple of critical factors.
Zip Co has been increasing its footprint and market share in the lucrative US market, resulting in record transaction volumes and revenue in recent times. In addition to this, increasing competition and consolidation of the BNPL space may put Zip Co on the acquisition radar in the not-too-distant future. The fact it’s managed to hold current levels and not roll over for so long is encouraging and creates a mildly bullish technical picture in the short-to-medium term.
We are looking for a breakout to the upside, which would trigger a buy, and we could see the stock make a quick run-up to around $8.00 or approximately 12% higher. This target coincides with the 200-day moving average and next point of resistance.
1 – Strong support around $6.63
2 – Stock is currently glued to the 50-day MA
3 – Initial profit target of around $8.00 or at the 200-day MA
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Two weeks ago, we put out a bullish note on BetMakers (ASX:BET) when the stock was trading at around $1.04. We provided an update last week as it hit our initial profit target of $1.15.
Our second profit target was always $1.25, which the stock reached today (high of $1.29), locking in around a 20% profit since entry. We will be looking to take some profit off the table at this level and raise our stop-loss to $1.10. If the position gets stopped out from here, traders will lock in around a 10% gain overall. Should the stock break through current resistance at around $1.25, however, this could see a retest of recent highs at about $1.37 fairly quickly.
Despite this, today’s price action signals a short-term top may be in place. So locking in the entire 20% profit currently on offer never hurt anyone and definitely won’t send you broke! From here, it’s about sticking to your trading rules, and if you have not yet written these down, use the above as a guide on how to manage risk and set profit targets based on technical levels. Happy trading!
1 – New stop loss level at $1.10
2 – Second profit target reached at around $1.25 - bearish engulfing candle forming signaling short term top could be in place
3 – Most recent high and next level of resistance at $1.37
Hold on a sec! You should consider whether any advice here is right for you. We don’t accept any responsibility for the accuracy of any information, opinions, or predictions we’ve provided, and we certainly haven’t taken your personal financial situation into account. Just a heads-up.