All-Ordinaries Index Tanks Over Recession Fear, 1 Stock in a Buy Zone – DTL

ASX All Ordinaries Index (.AORD) Market Round-Up

Last week, ASX All-Ordinaries Index (.AORD) witnessed its second consecutive weekly decline tracking global markets. Notably, .AORD settled at ~6663.30 with a decline of 6.74% for the week ending June 17, 2022. Domestic markets moved up taking positive cues from the NAB monthly business confidence data. According to the National Australia Bank Ltd. (NAB), NAB Business Confidence data was down by 4 index points in May 2022 to +6 index points from 10 index points in April 2022.

Meanwhile, the overall ASX indices are trading with a weak bias after the broad index broke an ascending channel pattern by downside on a weekly chart indicating a possibility of further downside potential in the long run. As per the technical indicators, prices are currently trading below the 21-period SMA and 50-period SMA and the next resistance level appears to be at 6849.50. The upcoming macro events that may impact the market sentiments include an update on the AU Monetary Policy Meeting Minutes, Melbourne Institute Leading Index, and US Unemployment claims data released weekly.

Global Markets Wrap-Up 

Wall Street indices witnessed its third consecutive weekly decline last week. Notably, S&P 500 settled at 3674.84 with a decline of ~5.79% while NASDAQ Composite Index also declined sharply to reach 10,798.35 losing ~4.77% for the week ending June 17, 2022. Meanwhile, the US indices declined last week despite of decrease in the US unemployment claims data. The seasonally adjusted initial US unemployment claims data published by the US Department of Labor, decreased by 3k to 229k for the week ending 11^th June 2022 against the unrevised unemployment claims at 232k in the prior week.

Having understood the US market performance over the past one week, taking cues from major global news, and based on our technical analysis of ASX All-Ordinaries Index (.AORD) for the upcoming week, now let us have a look at one ASX-listed stock from the technical standpoint. Noted below are our recommendation based on generic insights, entry price, target prices, and stop-loss for Data#3 Ltd. (ASX: DTL) for the next 2-4 weeks’ duration: -

Data#3 Ltd. 

Data#3 Limited (ASX: DTL) is an information technology company headquartered in Brisbane, Australia. The company leverages solutions such as cloud, modern workspace, security, data & analytics, and connectivity. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, DTL stock price broke the downward sloping trend line by upside in October 2021 and since then the prices are sustaining above the breakout level. Prices are now again taking support of the same downward sloping trend line support. Now the stock is heading towards its next resistance level at AUD 5.000 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 5.000 level supported by volumes may extend buying in the stock till AUD 5.480 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is trying to reverse from its oversold region and are currently trading at ~33.50 level indicating positive price momentum. The CMP is trading below its 21-period and 50-period SMA acting as an immediate resistance levels. Volume analysis is showing positive signal for the stock prices.

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Data#3 Ltd. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite for an upside potential, risks, and any previous holdings. This recommendation is purely based on technical indicator analysis, and fundamental analysis has not been considered in this report.  Summary of our recommendation is as follows: 

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the ASX All-Ordinaries Index and listed stocks’ prices:

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the technical analysis has been achieved and subject to the factors discussed above.

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume and we consider stocks with greater than or equal to 500,000 volumes as more liquid. Liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 50% of the Target 1.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is June 20, 2022. The reference data in this report has been partly sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

AUD: Australian Dollar

RSI: Relative Strength Index 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.