The Australian market has pulled back since its spectacular run in October this year, when the ASX/S&P 200 climbed a staggering 15 percent. In light of this you may wish to find stocks that are likely to stage a comeback in the near term.
In our recent article on identifying stocks with pullback potential we highlighted three candidates due for a pullback, and anyone who followed those ideas could have picked up between 5% and 12% on these trades over the past few weeks.
Market Analyser Can Help
You can use the Market Analyser software to identify keys stocks which are indicating they’re due for a comeback.
Start by using the Watchlist Wizard tool to quickly create a watchlist of stocks from the ASX Top 300. (For help with this tool check this post.)
We can then use the Prealerts scanner to identify stocks that indicate there is “accumulation” taking place, meaning the stock is being picked up by stronger hands as we run into the end of the year.
As you can see there are a number of stocks that are currently undergoing accumulation and could offer a potential buy signals. You may want to research these companies further before entering a trade.
The effectiveness of this scan depends on the current trend of the underlying stock and we have illustrated this in the following three candidates that came up in the scan in the past couple of days:
1) ANZ Bank (ANZ)
2) Wesfarmers (WES)
3) S&P/ASX 200 Index (XJO)
Note that you can also use volume as a confirmation for the buy signal, as you would be looking for volume to pick up as the prices rise.
ANZ Bank (ANZ)
ANZ is a major Australian-based bank operating retail and business banking franchises throughout Australia, New Zealand and the South Pacific. ANZ’s goal is to become Australasia’s leading, most respected and fastest growing major bank. Strategic expansion in Asia differentiates ANZ from its peers, and ANZ CEO Mike Smith has said that he expects 30 percent of its income to come from the Asia-Pacific unit by 2017.
You can see that the Prealerts worked pretty well for ANZ earlier in the year. Even though the overall market was trending down, the Prealerts gave five successful signals that ANZ was due for a bounce. When the stock price was trading into a potential support zone the Prealerts offered a great signal of when the stock price was likely to bounce. ANZ has now surged 8 percent since the signal.
Wesfarmers Limited (WES) is a diversified business covering supermarkets, department stores, home improvement and office supplies, coal mining, insurance, chemicals, energy, fertilisers, industrial and safety products.
Wesfarmers has been trading sideways for the past four months and the Prealerts indicator had given a good signal that the share price was due for a comeback. If you took this signal you would be up around 3.5% in two days and would be watching carefully for price action around the $31.30 level, which had been the key support level in the past month.
S&P/ASX 200 Index (XJO)
Since mid-November the S&P/ASX 200 Index had been sold-down heavily with the all negative sentiment over the eurozone debt crisis, but the index appeared to be due for a relief rally.
Again the Prealert scan has given some great signals in the past six months. There was another signal in the middle of last week which suggested a comeback was due and the index has since risen 5.5%. We would now be monitoring price action around the key pivot level of 4180.
Utilise the Prealerts features in Market Analyser to scan the markets for your specific trade selection criteria. You will save time and identify some likely comeback candidates.
Disclaimer: The information provided within this article is not a recommendation to trade a specific stock, but is intended for educational purposes only.
By Michael Hevern
For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research. Subscribers are in successful trades for ANZ, BHP, XJO, NAB and RIO to name a few of the recommendations over the past week.