The ASX 200 hit a low of 5209 in early trade, but has since recovered nicely amid some bargain hunting, IG's Chris Weston notes:
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- Those looking for a technical correction in the index need to focus on a deeper pullback to 5110, which would be 10% from the August 21 high of 5679.
- We’ve actually seen a correction in the materials space and the energy sector is not far behind, which makes a lot of sense given investors have a clear preference for value over growth names.
- What’s interesting is the level of companies in the ASX 200 trading below the longer-term 200-day moving average is now 56%, while 83% are below the short-term term 20-day moving average. Go back to the year’s high (on August 21) and these percentages stood at 30% and 26% respectively – this shows the pullback in the market has been broad-based.
- Scanning the market to look for companies that are trading 25% or greater below their consensus price target, while also rated ‘buy’ or ‘strong buy’, reveals 10% of the market (including names like CWN, RIO, HZN, BCI and ILU) fit the bill.
- Is this a sign of better value? Perhaps, but there is too much uncertainty right now and it takes a brave soul to be long in any kind of size – at least for those who focus on short-term moves.
The ASX 200 hit a low of 5209 in early trade, but has since...
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