ASX All-Ordinaries Witnessed Weakness After Continuous Rally, 2 Stocks in a Buy Zone – WSA, DUB

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

Last week, ASX All-Ordinaries Index (.AORD) declined from the key levels and settled at ~7706.20 with a weekly loss of 1.54% for the week ending September 10, 2021. Markets have declined amid negative cues from the US indices as well as from the negative Australian Service Index data published by the Australian Industry group. Notably, AIG Service index declined by 6.1points to 45.6 in August 2021 compared to 51.7 in July 2021 mainly due to lockdown conditions in some parts of Australia. 

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 an all-time high level of 7289.7 level on a weekly chart and prices might head towards its next resistance level of 7979.90 level. The upcoming macro events that may impact the market sentiments include an update on Australian House Price Index Data, Westpac Consumer Sentiment data, Australian Employment Change Data, and US Unemployment Claims released weekly.  

Global Markets Wrap-Up 

Wall Street indices took a pause from the continuous rally as S&P 500 declined last week and settled at 4458.58 with a loss of ~1.69% while NASDAQ Composite Index also settled at 15,115.49 with a decline of ~1.61% for the week ending September 10, 2021. Meanwhile, markets reacted negatively despite of the positive data from the US unemployment claims published by the US Bureau of Labor Statistics. Notably, the seasonally adjusted initial US unemployment claims data decreased by 35k to 310k for the week ending 04^th September 2021 against the revised unemployment claims at 345k 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 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 Dubber Corporation Ltd. (ASX: DUB) and Western Areas Ltd. (ASX: WSA) for the next 2-4 weeks’ duration: -

Dubber Corporation Ltd. 

Dubber Corporation Ltd. (ASX: DUB) is a software technology company. The company provides scalable and secured unified call recording platform to its clients across North America, Europe and Asia Pacific. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

On the weekly chart, DUB stock price broke the upward sloping channel pattern by an upside and sustaining above the same from past four weeks, indicating upward price trend. Volumes are showing increasing trend along with prices also indicates active buying participation in the stock.  Now the next immediate resistance level appears 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 volume may extend buying in the stock till AUD 5.400 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is hovering at ~81.82 level indicating positive price momentum. The CMP is trading above the 21 period SMA and 50-period SMA that indicates bullish trend for the stock. Volume analysis is showing increasing trend along with increase in prices that further supports our bullish stance.

Financial Summary: 

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Dubber Corporation 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 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:

Western Areas Ltd. 

Western Areas Ltd. (ASX: WSA) is an Australia-based mining company. The company’s main activities include mining, sale and processing of nickel sulfide concentrates and other base metals. Below are the key price indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

On the weekly chart, WSA stock price broke the downward sloping trend line by upside with heavy volumes and the prices are sustaining above the breakout point from past 5 weeks. Now, the prices are heading towards its next resistance level that appears to be at AUD 3.730 and AUD 4.030, and the stock may test these levels in the short term (2-4 weeks).

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the momentum indicator RSI (14-period) is hovering at ~66.98 levels indicating bullish momentum for the stock. Prices are trading above 21-period and 50-period SMA indicating positive price trend. Volume analysis is showing positive sign for the stock.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Western Areas 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 in the ‘Entry Price’ can be considered depending upon the upside potential expected and taking into consideration the Target 1 and trailing stop-loss levels indicated. For example: - An Investor can consider entering the stock at or above a certain range (3%-5%) from the Entry Levels recommended depending upon the potential upside expected and difference from the Target 1 and Trailing-Stop Loss Levels indicated for the stock.

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 September 13, 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 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.