This week, we are taking a look at the Australian stock market. As with any other market, we apply our top down approach, in other words we are looking at the index, then the various sectors, and finally deep diving into the single stocks within the best sectors (those in uptrends) and leaving those in sideways trend and downtrend on the sideline.
On a monthly basis, the S&P/ASX200 index is in an uptrend, which helps our case to look for uptrending sectors and companies.
After reviewing all the 16 sectors on a weekly basis, two are standing out, the Healthcare sector as well as the Consumer Discretionary.
Let's start with Healthcare ($XHJ):
After 5 years of trading in a range (2007-2012), the XHJ broke out and never looked back. The sector has been in an uptrend since the low in 2011 and just went through (on the upside) another Fibonacci extension level (39651) which should now become support.
One of the best performing stock within the Healthcare sector is CSL Limited ($CSL):
CSL is almost replicating the same foot steps as the sector itself. That Fibonacci $331 level is pulling CSL like a magnet.
Next up is Nanosonics Limited ($NAN):
There as well, after breaking out of a 3 years trading range, the stock started its uptrend. Current support lies around $5.90, with $8.25 as next resistance.
Now let's look at the other above mentioned sector, the Consumer Discretionary ($XDJ):
Here again, the Fibonacci extensions levels give well defined support and resistance areas. The index just went through the 2590 resistance which now turns into support. The next extension lies just above 3500.
Now, let's look at 2 Consumer Discretionary components, first off, JB Hi-Fi Limited ($JBL):
After oscillating within 2 Fibonacci levels for 3 years, JB Hi-Fi broke out of the $32.90 resistance level in September, came back down mid October to test that said level and confirm it as new support. The next extension level can be found at $49.
Finally, let's look at Wesfarmers Limited ($WES):
Kind of the same story again, 5 years of trading range, broke out to reach its first Fibonacci extension level, came back down heavily in the second half of 2018 and since December 2018 Wesfarmers has been in a steep uptrend. The second Fibonacci extension is $44.80.
Bearing in mind that some of these charts look a bit extended, a healthy pullback is not only to be expected but would be welcomed.