This week our hot stocks are Tassal Group and Aristocrat, while Michael McCarthy does not like Telstra.
Michael McCarthy, chief market strategist at CMC Markets, likes Tassal Group (TGR).
He says that while the salmon farmer’s share price tanked on lower salmon prices, the group has a diversified salmon product range and also owns the Di Costi seafood group.
“The sell-off looks overdone in my view at a PE ratio between 10 and 12 times (some uncertainty of 2018 earnings forecasts) looks cheap,” McCarthy said.
Tassal Group
However, Telstra is in McCarthy’s bad books as the earnings outlook remains clouded, despite an impressive share price rally.
“Traders refer to this sort of move as a dead cat bounce. Shareholders may wish to take advantage of what I see as temporary strength,” he says.
Chartist pick
This week our chartist Gary Stone from Share Wealth Systems picks Aristocrat (ALL) as his hot stock.
Aristocrat has traded in a range between $20 and $24 for the last six months since mid-June following a 67% rally over the prior seven months from mid-November 2016.
Stone explains:
During the sideways move over the last 6 months Aristocrat has found text book support at the 38.2% Fibonacci zone, the blue rectangle in the right middle of the chart around the $20 level. The most recent trough in the last week of November formed a higher high, setting up Aristocrat to attempt another breakout above its all-time high of $24.30.
Whilst there is a high probability that this can occur on the next attempt, if it doesn’t it should try again with a month.
If sentiment changes to highly negative towards Aristocrat, the first signal to exit is the red researched trailing stop line which is currently at $21.94. If you find that a bit too close then the lower blue rectangle support zone around the $20 area should be your last resort exit if you would prefer not to hold through a potential fall to around $16. I typically allow a leeway of around 5 trading days of a stock trading below a discretionary support zone but ruthlessly execute the following trading session when stock closes below the precise trailing stop line.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
