Technical analysis: 13 May 2021

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
13 May 2021, 10:00 AM

Suncorp Group (SUN) – Short-term weakness

The latest short-term up swing has encountered resistance around $11.20 for a second time, with Wednesday’s price action gapping down.

The gap shows that selling pressure is strong and suggests that further weakness is likely to unfold in the short-term.

The RSI and the stochastic indicators have turned down from overbought levels also pointing to a likely pull back in the short-term.

The potential short-term downside price target is $9.70. Given the second failure to break above its previous key resistance, we are of the view that the price is likely to trade sideways in the months ahead.

Therefore, our medium-term view on the stock is neutral.

BHP Group (BHP) - Overbought

BHP has been trading in a strong up trend channel since March 2020 which is still technically intact. The current short-term up swing has rebounded to its channel line crossing at $52.00 where selling pressure is likely to arise.

The weekly and daily RSI and stochastic indicators have reached overbought territory suggesting that the price is likely to pull back in the short-term.

The initial downside price target is $47.00, however this level could be exceeded.

We note a small triple bearish divergence between the price and the RSI indicator has formed on the weekly chart since January 2020, which suggests that the strong secondary up trend is likely to take a breather and the price trade sideways in the coming months.

Rio Tinto (RIO) – Short-term weakness

RIO has been trading in a strong up trend since March 2020 which is still technically intact.

The up trend has lost momentum over the past five months and the price has been trading sideways, fluctuating within the boundaries of a 5 point reversal or widening wedge pattern, which is associated with high volatility and uncertainty.

The current short-term up swing has rebounded to the upper boundary of the pattern crossing at $135.00 where selling pressure is likely to arise.

The RSI and the MACD indicators have reached overbought territory suggesting that the price is likely to pull back in the short-term. The initial downside price target is $120.00 however this level could be exceeded.

Newcrest Mining (NCM) – Buy on weakness

In our last update on the 12th of April 2021 we discussed number of bullish developments on the chart and the likelihood of higher prices unfolding over the medium-term.

The price rallied over the past month and our initial upside price target of $28.00 has been reached.

We are of the view that the price is in the process of building a bullish inverse head and shoulders pattern, which adds further confidence of the likely reversal of the prior secondary down trend.

A subsequent and decisive break above resistance of $28.18 is likely and is required to confirm the pattern. Given the further improvement in the price structure, our medium-term target of $30.00 appears conservative, therefore we lift it to $32.00.

In the very short-term, the price is likely to experience a mild pull back to unwind its overbought stochastic readings. We see such potential short-term share price weakness as an opportunity to buy the stock.

Commonwealth Bank (CBA) - Overbought

CBA has been trading in a consistent secondary up trend since March 2020 which is still technically intact.

The current up swing has rebounded close to the upper boundary of its broadening wedge crossing at $96.50 where initial selling pressure is likely to arise.

The weekly and daily RSI indicator has reached overbought territory suggesting that the price is likely to pull back in the short-term.

Given the proximity to its March 2015 record high of $96.27, to its current dynamic resistance and the overbought weekly and daily momentum conditions, we are of the view that the price is likely to experience a pull back in the short-term.

The initial downside price target is $90.00, however this level could exceeded.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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