ASX All-Ordinaries Index Trades in a Bullish Trajectory, 2 Stocks with an Upside Potential – NXT, Z1P

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

Last week, ASX All-Ordinaries Index (.AORD) hovered in a bullish trajectory and made an all-time high of ~7655.90 and settled near the record high levels at 7624.30 with a gain of ~0.62 percent for the week ending June 18, 2021. ASX index prices started this week with negative tone taking cues from US markets which fell sharply in the latter half of the week due to higher unemployment claims data and Fed Meeting Minutes thereby offsetting the impact of the positive Australian May retail sales data (seasonally adjusted) which posted 0.1% gain to A$31,069.3 million compared to A$31028.2 million posted in April 2021, according to Australian Bureau of Statistics (ABS).

All-Ordinaries ASX Index is trading in a rising wedge pattern on a weekly chart and witnessed resistance at the upper band of the pattern and took support of the lower band. Overall domestic markets are trading in a bullish zone mainly led by Energy, Utilities and technology stocks which are currently among trending sectors.

As per the technical indicators, prices are still reflecting a golden positive crossover between the 21-period SMA and 50-period SMA indicating a bullish trend. The index recently broke all-time high levels of 7289.7 level on a weekly chart and prices might be heading towards its next resistance level of 7714 level. The upcoming macro events that may impact the market sentiments include an update on The Conference Board Leading Index, US GDP Third Estimates (Quarterly), and US Unemployment Claims released weekly. 

Global Markets Wrap-Up 

Wall Street lost its 4-week winning streak last week. After hitting the record high level of ~4257.16 last week, S&P 500 settled in a negative zone at 4166.45 with a loss of ~1.91 percent while NASDAQ Composite Index settled at 14,030.38 with a loss of ~0.28 percent for the week ending June 18, 2021.

Global indices ended in red after the Fed meeting signalled the tightening of monetary policies. As per the statement, policymakers may increase the interest rate twice by 2023. Also, the US weekly unemployment claims data published by the US Labor Department increased last week to 412,000 from 375,000 the prior week which also depressed the market sentiments up to certain extent.

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 the two ASX-listed stocks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for NEXTDC Ltd. (ASX: NXT) and ZIP Co Ltd. (ASX: Z1P) for the next 2-4 weeks’ duration: -

NEXTDC Ltd. 

NEXTDC Ltd. (ASX: NXT) is a datacentre solutions company. The company operates nine data centres across Australia with more than 660 clouds through a rich partner ecosystem, networks, and ICT specialty services. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

On the weekly chart, NXT stock price broke the falling channel pattern by an upside. Prices also took the support of the falling channel pattern last week that might further lead the prices to its resistance levels. Now the next immediate resistance level appears at AUD 14.00 and in the short-term (2-4 weeks), prices may test the level. An upside above AUD 14.00 level accompanied by volume may extend buying in the stock till AUD 15.00 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~55.37 levels from near to oversold region indicating positive price momentum. The CMP is trading above the 21 and 50 period SMA which is supportive for the stock prices. Volume analysis are also showing positive signs.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for NEXTDC Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that NEXTDC Ltd. is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite on 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:

ZIP Co Ltd. 

Zip Co Ltd (ASX: Z1P) is an Australia-based payments provider and credit card disruptor. The Company operates through ZIP AU, Zip Global and Spotcap. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

On the weekly chart, Z1P stock price are trying to rebound from lower levels after taking support of the upward sloping trend line. Prices are also trading above its 50-period SMA that might be supportive for the current price action. Now the next immediate resistance levels appear at AUD 10.60 and AUD 11.60 and prices may test the level in the coming period. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~54.03 levels from lower levels indicating positive price momentum. The CMP is trading above the 50-period SMA that indicates positive tone. However, prices are trading below 21-period SMA which is acting as a resistance. Volumes are also positive for the stock prices.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for Zip Co Ltd. is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Zip Co ltd. is looking technically well-placed on the chart and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite on 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. The 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.

Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

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 21, 2021. 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 class advice only. The information on this site 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.