Most investors know of Wesfarmers being the owner of major retailers such as Bunnings, Officeworks, Kmart, and Target, and being the former owner of Coles. However, this diversified business also has interests in chemicals, energy, fertilisers, and lithium. And it’s a stock that Michael likes.
“It pays a good dividend and has been a staple for SMSF portfolios over the years,” Michael said.
“The share price has almost doubled since the COVID lows, but I still think it has much further to run.
“In February, the stock peaked near $56 and then it had a dip (number 1). In April, it tested that $56 level again before once more taking a dip lower. However, the second dip (number 2) was much shallower.
“This was a good sign that there was plenty of buying ready to buy the dip this second time around. It leads to a charting formation known as a “cup and handle”. It indicates good buying pressure, and all the investor needs to do is wait for “confirmation” that it’s ready to head higher. This is achieved when the stock pushes past the share price ceiling (in this case, $56).
“Once that happens, it becomes another buying opportunity and we often see the stock trend higher for a while longer.
“This pattern is the same one that I noted in April for MIN [1], and that stock is still powering ahead.
“Based on how WES is trading, I’m confident that its share price can be quite a bit higher in a few months’ time,” he added.
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