australia stock market ,australia stock market news,asx news
Bank on the Bank of Queensland?
Would it be the time to confidently come back on the financial stocks? The technical analysis gives us a few arguments for a positive answer. First example with Bank of Queensland (ASX: BOQ).
— The weekly chart shows that, despite the rebound started in last March, the price action has only retraced a small part of the huge decline triggered at the beginning of the financial crisis, in October 2007.
— In details, we can see that between the historical high posted in October 2007 ($19.54, point A on the chart) and the low posted in last March ($6.30, point B), the price declined by 68%. The bounce has already driven twice the price towards the first Fibonacci retracement (the ratio of 23.6%) in last April. This level (at $9.5) acted as a first resistance for the rebound: once reached, the price action immediately corrected and fell back to $7.50 in May.
— It eventually bounced back quickly and is now around $9. The weekly indicators have been remaining oriented upward since March. The MACD, for instance, is bullish as it has been rising well above its moving average for more than 3 months now. There are no signs that it may peak soon. This of course does not mean that short-term corrections are not possible, but it clearly indicates that on medium-term outlook is on the upside.
— It is likely that another attempt to break above the level of $9.50 will occur in the coming weeks. While numerous stocks and indices peaked during the first fortnight of June, BOQ has been strongly backed. The 10-day moving average (MA) has crossed above both the 40-day and the 100-day moving averages. This shows that the short-term has been bullish. As long as the current moving averages configuration remains identical (10-day MA above 40-day MA and 40-day MA above 100-day MA), the bullish picture is still valid.
— The first target in this scenario is $9.50. But as the medium-term outlook is positive, a further rise is probable. The next resistance level identified is the 38.2% Fibonacci ratio, around $11.5. Eventually, the main target would be the 50% retracement level, at $13.
— The idea would be then to BUY the stock BOQ at the current level, around $9. Place your take-profit at $11.35, just below the 38.2% ratio level. The stop-loss should just below $8, say at $7.95.
Suncorp-Metway Under The Sun?
— This is another example. Another bank, Queensland based. The overall configuration is quite similar to BOQ. One axiom of technical analysis is that same causes product same consequences.
— The global picture is almost identical: huge decline of the stock price in 2007 and 2008, a low point posted recently in last March and small rebound so far, rising medium-term indicators, therefore some real potential upside in the following months. Let’s see that in details.
— The decline: started in February 2007 (point A on the weekly chart), when the price was above $21). A succession of bearish waves more or less intense led the price to the low of $4.36, posted in early March this year (point B). This is a plunge of 80% in 2 years.
— Of course there had been a few rebounds during this long-term bearish trend. Those were technical counter-trends generated when the price was obviously oversold or when support levels were reached. Today the price is moving around $6.50. The rebound so far is only a slight retracement of the 2-years decline. We can’t assert yet that this long-term bearish trend is over.
— However we expect the current bullish move to rise further before a potential completion. The weekly MACD has a bullish shape: oriented upward and well above its moving average.
— On the daily chart, the stock has been traded in a tight range for the last 3 months. The price action has failed several times to overcome a gap created in early February this year. This is an immediate resistance that did not trigger any large correction. A move above $7 is probable (above the gap) and it would trigger new “long” positions. The Relative Momentum Index shows that some buying pressure exists and that there is no overbought configuration.
— Actually the real target for the rebound initiated in March is likely to be the very first retracement level of the 2-years decline. First because it is usually the first significative objective after a long-term trend, and second because it also corresponds to the low of 2003 (when the stock bounced as well as the global stock markets). Previous lows become new highs. That’s why the objective here is around $8.5.
— With a medium-term perspective, the trade idea is therefore: BUY the stock SUN on the current levels (around $6.50). Place your stop-loss below the low of May, say at $5.50. Place your take-profit at $8.5.
