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Four stocks to watch in 2013

This article appeared in the January 2013 ASX Investor Update email newsletter. To subscribe to this newsletter please register with the MyASX section or visit the About MyASX page for past editions and more details.

What the share price charts say about AGL, Coca-Cola Amatil, Incitec Pivot and NAB.

Photo of Regina Meani By Regina Meani, author

This article identifies four of the top 50 companies in the Australian market that have ridden out the waves of uncertainty and unrest that have come from overseas, and look set for an optimistic 2013.

(Editor's note: do not read the following commentary as recommendations. Do further research of your own or talk to your financial adviser before acting on any ideas or themes in this article).

1. AGL

AGL's history is impressive. Formed in Sydney in 1837, the company supplied gas for the first public lighting of a street lamp in Sydney in 1841. Its record has remained impressive as it moves towards creating a sustainable energy future for its investors, communities and customers.

The company has major investments in hydro and wind, and ongoing developments in key renewable areas including solar, geothermal, biomass, bagasse and landfill gas. It is regarded as a renewable energy leader. AGL also operates retail, merchant energy and upstream gas businesses, and has more than three million customers.

AGL share price history chart - January 1988 to 2012

AGL share price history chart - January 1988 to 2012

Source: Regina Meani, Your Technical Analyst

AGL's share price movements reflect its impressive history, moving within a broad upward path from the 1980s. Peaking at $17.65 in January 2007, the price experienced a reactionary movement, pulling back and moving sideways across the trend. The action exhibits a marked resemblance to the 1998-2003 experience when, after peaking in 1998, it pulled back some 40 per cent before oscillating and moving higher. The current phase has experienced a similar range.

As the phase progresses we may expect more oscillations between $13.50 and $14.50 but with the possibility of broadening the range to incorporate lower support and higher barriers. These lie at $12.50-$13.00 for support and at $15.50 and $16.50 as resistance. Once these barriers are overcome, the way would be cleared for the price to move higher in much the same way as in 2005. This suggests potential for the shares to rise towards $22, then $26 and possibly much higher. The risk to this would be a drop below $12.

2. Coca-Cola Amatil

One of the largest bottlers of non-alcoholic beverages in the Asia-Pacific region with operations in five countries - Australia, New Zealand, Fiji, Indonesia and Papua New Guinea - the company is one of the world's top five Coca-Cola bottlers.

Coca-Cola Amatil share price history chart - January 1988 to 2012

 Coca-Cola share price history chart - January 1988 to 2012

Source: Regina Meani, Your Technical Analyst

From its lows around 10 cents in 1974, the share price spiralled through the late '70s and '80s to halt in late 1996 at $10.44, suffering from momentum exhaustion. The price topped out and fell into a bear trend that ended at $2.82 in June 2000. The price overcame resistance around $5 and then $7 to forge higher, settling into a more comfortable path within its longer-term trend channel, which continues to carry the price.

On the chart above, the trend channel is divided into segments or corridors, and during strong market moves prices sometimes go out of their comfort corridor and thrust upwards as the trend escalates. Similarly, a strong momentum swing to the downside may force the price into a lower corridor of support.

In reaching through $14 in August, momentum has slowed, producing a typical pause action within the trend. Churning may continue in the $13.20-$14.20 range as the price balances in the trend before taking its next step higher towards $15 and then $17, but with a strong path higher. Significant support lies in the $11.50-$12.50 area.

3. Incitec Pivot

In the past five years, Incitec Pivot has been transformed from an Australian fertiliser company to an organisation with interests in North America, South America and Asia, as well as Australia. The company has four core business platforms: manufacturing, fertilisers, explosives and trading. Its 5000 employees manufacture and market fertilisers and explosives and industrial chemicals to customers around the world. As well as owning and operating 20 plants in the US, Canada, Australia, Mexico, Indonesia and Turkey, the company has joint-venture operations in South Africa, Malaysia, China and Australia.

Incitec Pivot share price history chart - January 2000 to 2011

 Incitec Pivot share price history chart - January 2000 to 2011

Source: Regina Meani, Your Technical Analyst

From a small base that formed between 2003 and 2006, the share price spiralled through 2007 to reach a peak at $9.03 in June 2008, gaining more than 14 times its price from its 2003 low. The rise over-extended its long-term momentum and a top formed, with the price falling into decline to achieve a spike low and turning point at $1.63 in February 2009.

The price quickly reversed and trended up into 2011 but halted around $4.70 in a combination of resistance and divergent momentum. Unable to force a breakaway through the barrier, the price turned down and fell into support in June 2012, finding a double turning point at $2.62.

The subsequent rally and recovery has seen the price make a tentative break of the downtrend from the peak and we look for confirmation with a push through $3.40-45. When this occurs the price would be on its way higher to approach old barriers at $3.60-80 and then around $4.70, but with the potential to move significantly beyond these levels.

A drop back below $2.90 may endanger the recovery process.

4. National Australia Bank

The company provides a comprehensive and integrated range of banking and financial services, including wealth management. The NAB has 12 million customers and 50,000 employees operate more than 1750 branches and service centres globally. Its franchises in Australia are complemented by businesses in New Zealand, Asia, the United Kingdom and the United States.

National Australia Bank share price history chart - March 1965 to 2007

National Australia Bank share price history chart - March 1965 to 2007 

Source: Regina Meani, Your Technical Analyst

A powerful upward path that began in the 1970s has remained intact during subsequent market downswings and although there have been some wide-ranging prices; NAB appears set to underpin a stronger performance (it has underperformed the other big banks shares in recent years).

Forming a double peak around $44.70 in mid-2007, the price fell substantially during the next two years to locate a low and turning point along its long-term path at $15.83 in March 2009. In effect it had experienced a significant bear movement within its long-term upward path.

Springboarding into recovery, the price regained much of its lost ground in 2009, reaching $32.73 before succumbing to overspent momentum and resistance. The price pulled back and settled into a sideways phase with a slight downward slant, which continues to influence price movements.

As the phase progresses we may expect the price to churn between $24 and $26.50 with a broader oscillation range between $22 and $27.50, and $27.50 providing the first key barrier to the next major advance followed by $30.50, with the potential to rise towards $35-$37 and a test of the peak zone.

A fall below $21.90 may delay this process with key support around $19.

About the author

Regina Meani is a freelance consultant in market analysis and one of Australia's leading technical analysts. She is an authorised representative of stockbroker BBY and provides its clients with monthly reports and presentations on the top 20 companies and the overseas equity, commodity and currency markets. Her company, Your Technical Analyst, provides analysis of the above markets to major institutional and individual investors and traders, as well as private tutoring and larger seminars for training in market psychology, CFDs and shares, and technical analysis.

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