Share tips and stock recommendations for the Australian (ASX) share market – buy, hold, and sell. Michael Gable is an expert guest commentator for the stock market newsletter thebull.com.au.
This post is an extract from the newsletter dated 24 May 2021. You can access the full version of the article HERE.
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Commodity prices in general continue to strengthen, and against a backdrop of government stimulus and threats of inflation, we continue to see tailwinds for resource stocks. BHP remains locked into a strong uptrend on the chart. It had recently broken above strong resistance which had been in place for over 10 years. This means that from a technical perspective, we should see significantly more upside.
Gold prices have started to recover during the last several weeks. Against a backdrop of possible inflation and a lower US dollar, we see this is supportive for the gold price. EVN in particular has been trading very well on the charts, it has recently broken its downtrend and started to re-establish a new uptrend. As a low cost producer, EVN benefits from higher margins than its peers and is therefore more insulated against any gold price volatility.
Aristocrat has been one of our favourite investments over time. The company recently upgraded their earnings guidance and is looking to deliver profit figures higher than the market had anticipated. The share price has recently leaped to all-time highs, but we feel that with the strong earnings growth, and the strong charting profile of the shares, the stock price can continue to carry this positive momentum.
WOR is an engineering services company and is heavily exposed to the energy sector. Rising demand and commodity prices is seeing increased demand for WOR’s services. Share price weakness since January has recently given way to renewed buying support and WOR shares are looking much stronger on a charting basis. Oil prices likely to continue rising and this will continue to support the WOR share price.
KGN shares remain in a downtrend and it looks as though they will continue to slide further. The company has faced difficulties with stock levels, and this has weighed on the share price. Although the business will bounce back from this, the other problem affecting the share price is the high P/E multiple that this technology stock trades on, and this leaves it vulnerable to rising interest rates. So despite whatever the business does, for now the market is worried about valuations for technology stocks.
SIG has recently had to contend with increased competition and weaker margins. After looking fully valued earlier this year and struggling to make much further progress with its share price, the CEO also announced his resignation in April. This added uncertainty around the company’s future has weighed on the share price. Lack of buying pressure on the chart is leading us to believe that we have further weakness ahead.
Michael Gable is managing director of Fairmont Equities.
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