Lack of Volatility in ASX All Ordinaries, 2 Stocks in a Buy Zone – MP1, MGV

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

Last week, ASX All-Ordinaries Index (.AORD) prices were unable to hold initial gains and settled at 7320.70 with a marginal decrease of ~0.07 percent for the week ending April 23, 2021. Markets are trading near all-time high resistance levels and any major cues which could provide the direction to the prices further is missing. The upcoming global events that can be closely monitored include FOMC Meetings, US GDP 1^st Quarterly Advance Estimate, and weekly US Unemployment Claims data. Meanwhile, one of the positive events witnessed last week include Australian Retail Sales data published by Australian Bureau of Statistics (ABS), which rose by 1.4% to $30724.5 million from February to March 2021.

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 data events that may impact the market sentiments include an update on Consumer Price Index, Private Sector Credit, and Producer Price Index released quarterly.  

Global Markets Wrap-Up 

S&P 500 made a new all-time high at 4194.17 but was not able to give positive weekly closing last week. The index settled at 4180.17 with a marginal loss of ~0.13 percent while NASDAQ Composite Index settled at 14,016.81 with a loss of ~0.25 percent for the week ending April 23, 2021. Markets trended slightly lower after the news related to the plan to increase the capital gains tax by almost double by the Biden administration floated. Conversely, markets reacted positively due to lower US weekly unemployment claims data that have declined last week to 547,000 (which is the lowest level of the initial claims since March 14, 2020) from 586,000 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 Megaport Ltd. (ASX: MP1) and Musgrave Minerals Ltd. (ASX: MGV) for the next 2-4 weeks duration: -

Megaport Ltd. 

Megaport Limited (ASX: MP1) is a software company engaged in elastic interconnection service to its customers. The Company's division includes Asia-Pacific, North America, Europe, and Others. The summary of stock’s key price indicators is provided below: -

Price Action Analysis (on the Weekly Chart)

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is hovering at ~53.72 levels indicating a positive trend for the stock. The CMP is trading above 21-period SMA which is supportive for the stock prices. However, prices are trading below the 50-period SMA which is acting as an immediate resistance level. Volumes are increasing along with prices further indicating long build-up in the stock.  

Financial Summary: 

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

General Recommendation:

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

Musgrave Minerals Ltd. 

Musgrave Minerals Limited (ASX: MGV) is an Australia-based Metals and Mining company engaged in gold and base metal exploration. The company discovers and develops gold and base metal resources within Australia. Below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI has moved up to ~51.75 levels indicating a positive trend for the prices. The CMP is trading above the 21-period SMA, which is supportive for the future price movement. However, prices are trading below the 50-period SMA which is acting as an immediate resistance level. Volumes are increasing along with prices further indicates long build-up in the stock. 

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Musgrave Minerals 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. 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: 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.

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 April 26, 2021. 

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.

Disclosure: Musgrave Minerals Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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.