Like many other global stock indices, the ASX 200 has spent the last few months in a period of sideways consolidation following the print of a recent all-time high. I have been saying, for many months now, that I expected the ASX 200 to chop around either side of the key 7,200 level until after the 2022 Australian Federal Election. Looking back, it is clear to see that this analysis has been pretty spot on.

At the time of writing this article we are still waiting for the Australian Prime Minister to call the date of the Federal election. However, this will be held sometime in May and it is after that that I would expect our major stock market index might be able to break free of this consolidation phase. There are a number of stocks that have pulled back significantly from their all-time highs and these are my preferred technical setup‘s to monitor for potential trading opportunity. I like to look for stocks that have pulled back, preferably in descending wedge style patterns, and that form a base before embarking on any new ADX momentum-based upward trajectory. The ASX stocks discussed in this article are just some that I have my eye on as we wait to see which political party will be successful in the coming election.

XJO: ASX-200

The weekly chart of the ASX-200 is shown in Figure 1 and note how the all-time high, of 7,632.80, was printed back in August 2021. Price action has essentially chopped sideways since then, either side of the whole-number 7,200 region, as this is near the previous all-time High of 7,197.20 printed just prior to the onslaught of Covid-19.

I have noted for many months, across different forums, that I expected the XJO index to chop sideways around this key and psychological 7,200 level until after the 2022 Australian Federal Election and this is exactly what has evolved! Old ‘Resistance’ levels, such as this 7,200 region on the XJO, are often tested on multiple occasions before evolving into any potential new ‘Support’.

Traders should watch for any new momentum-based trend line breakout following the election and I do note that this chart displays a bit of a Bull Flag appearance! ‘Bull Flags’ are bullish continuation patterns so this is a bit of a technical reason to harbour some optimism here!

ASIA: ASIA Technology ETF

Figure 2: ASIA weekly

 

BUB: BUBS Australia

BUB is another ASX stock that is trading well below its all-time high, printed back in May 2019. Price action has formed up within a triangle pattern and there does look to have been a recent bullish breakout (Figure 3). At the moment you can see that +DMI bullish momentum is on the rise but the overall ADX momentum indicator remains below the 20 threshold. To have confidence in this bullish breakout I would want to see both the +DMI and ADX above 20 and rising.

 

A Fibonacci retracement shows that the popular 61.8% retracement level is up near $1.10 and you see from the chart that this is a popular reaction zone for this stock. This would be one level to monitor if bullish momentum continues.

 

Figure 3: BUB weekly

 

DMP: Domino’s Pizza

Domino’s Pizza is another ASX stock that has pulled back since printing an all-time high, of just above $160, back in September 2021. Price action is currently trading around the $80 level and you can see, from Figure 4, that this has been a significant reaction zone over the last six weeks or so, as well as back through the latter part of 2020. There is a bear trend line in place and it could be worth watching for any new breakout, either up or down.

 

Any bullish breakout would have me looking for price to potentially re-trace to the $133 level given that this is where the popular 61.8% Fibonacci retracement level lies and it is also a previous reaction zone, as evident over the last few months of 2021.

 

Figure 4: DMP weekly

 

IRI: Integrated Research

Integrated Research is another ASX stock that has pulled back from the all-time high, of just under $5, printed in August 2020 (Figure 5) and the retracement here has shaped up into one of my preferred descending wedge patterns. Price action seems to be trying to hold above the $0.50 level; as can be seen by the sideways print of the last seven weekly candles.

 

There does seem to be an effort to make a bullish break out from this wedge and I do note that the bullish +DMI indicator is on the rise. At the moment, though, the +DMI remains below 20 and so for any confidence with a bullish breakout from this wedge pattern I would be looking for the +DMI to be above 20 and rising and for the ADX to be above 20 and rising as well.

 

Placing a Fibonacci retracement on the swing low move places the popular 61.8% retracement level near $3.25 and note how this level has been a reaction zone over the past couple of years. Thus, $3.25 would be one level worth keeping in mind as a target should bullish momentum develop and continue.

 

Figure 5: IRI weekly

 

KGN: KOGAN

Kogan is another ASX stock that is trading wall below the all-time high, of around $25, that printed back in October 2020 (Figure 6) and is another stock where the pullback is shaping up within a bullish-reversal descending wedge.

 

The stock price has been hovering above the $5 level for the past six or so weeks and this can be seen to be a reaction zone for the stock back throughout 2019 as well as the early part of 2020.

 

Placing a Fibonacci retracement on the swing low move sees the popular 61.8% level near $17.50 and this also happens to be a previous reaction zone of some sort throughout 2020 and early 2021. This chart is worth monitoring for any trend line break out and, if the breakout is bullish to the upside, watch for confirmation by way of the +DMI indicator being above 20 and rising as well as having the ADX momentum above 20 and rising. The $17.50 level would be one target worth monitoring if bullish momentum develops and continues.

 

Figure 6: KGN weekly

 

MFG: Magellan Financial Group

Magellan Financial Group is another stock that as well trading below the all-time high, that was printed just before the start of the Covid outbreak back in February 2020, where price action reached up to almost $74 (Figure 7). The recent swing low move shows that a descending wedge is in place and there does look to be some pressure being placed on the upper trend line for a bullish breakout. I do note that the bullish +DMI is below 20 but on the rise but, to have any confidence in a bullish break out, I would want to see the +DMI above 20 and rising and for the ADX to be above 20 and rising as well.

 

A Fibonacci retracement placed on the most recent swing low move shows that the popular 61.8% level is up near the whole number $40 region and this would be one target to keep in mind if bullish momentum was to develop and continue.

 

Figure 7: MFG weekly

Concluding comments

Like the overall market index XJO, plenty of ASX stocks have pulled back from their all-time high levels. Many Technical Analysts enjoy this type of price action as it can enable trades to be entered at a discounted price. Watching for momentum-based trend line breakouts is just one way to select new trading opportunities and six different ASX stocks have been suggested in this article as being worth monitoring. As always, traders should only ever trade with funds that are surplus to their needs and that they can afford to lose. Trading is a high-risk activity and trading risk, measuring the amount of funds that can be lost on a trade, should be carefully managed. Traders should seek financial advice before engaging in any trading activity.