XJO (ASX) Vanilla XJO Thread

Why concentrate on Large Caps rather than Small Caps?

Large Cap Stocks when compared to Small Caps, provide stability and consistent returns over time. Small Caps, if you're lucky, can bring a bonanza - but usually fizzle out into not much of anything. They are also the back-bone of the ASX200 - XJO.

And, the other reason, why I like Large Caps over Small Caps - they tend to "revert to the mean". Large Cap Stocks, like BHP or CSL, have been around a long time. If you find that they have fallen, and you're patient, you'll find they will bounce back to the upside - to the "mean".

So - when looking for Large Cap stocks, I'm looking for fallen Angels, which might be ready to bounce to the upside.

Looking at the Big Picture - the Large Cap Index.

VLC was up strongly 1.95% this week, out-pacing the ASX200 which was up +1.19%. How come? Largely due to one set of stocks - Banks. I dont' have a pure index just for the big five banks (all in the Large Caps) but we do have an ETF for Banks (MVB), which is dominated by the Big Five. MVB was up this week +2.93%.

Large Caps - Weekly Chart.

Large Caps topped at the beginning of December. They then fell sharply until just before Christmas. Since then they've been in a consolidation pattern. The three Super Trend lines show that the index is still in a moderate down trend.

Large Caps - Daily Chart.

The past week, although strong, kept the Large Caps in their consolidation zone. On Wednesday, they topped out and fell on Thursday and Friday.

Point of Control (marked on the chart) is the price level at which most volume has occurred. It often acts as support/resistance. Currently, it is acting as resistance to further upside movement.

20 Leaders individual stock performances.

12 stocks were up this week with one flat (WOW +0.03%). Seven stocks were down, with the worst being Woodside -4.93%. I was warning for a couple of weeks that Woodside was likely to pull-back after having had a big bull rally of >13%.

Best performers for the week were: Wesfarmers (one of last week's picks) up +5.01%, NAB +4.29%, and MQG +3.59%. Note that two out of three best performers are from the Five Big Banks

Wesfarmers was one of my three picks from last week. The other two were Brambles (BXB) and CSL. BXB performed well, up +2.53%, out-performing the Large Cap average of +1.95%.

CSL had a poor week, down -1.11%. Only trade such stocks if clear signs of reversal appear. That didn't happen this week for CSL.

Three Fallen Angels for the coming week.

I've kept CSL in my picks for this week. (BXB and WES are now out because of their good performance.). The other two picks for this week are TLS and WOW, which both stand a chance of a "reversion to the mean". The stand-out in this chart is S32 which has sharply improved its relative strength status this week.

CSL
CSL was down four out of five days this past week and bounced on Friday for its first positive day out of the past eight.
It is now sitting at the next level of support. If it can push up from here and break above the first Super-trend line (10/1). it will become a "buy".

TLS

TLS shows plenty of bearish supply (lots of blue candles) pushing the price down. It is now down to horizontal support and the lower edge of the Value Zone which might provide a base.

Look for a bullish engulfing candle and/or a break above the first Supertrend Line (10/1).

WOW
WOW is in a wide consolidation zone between 29.78 and 30.91. The top of the Value Zone lies at 30.45. I'd expect a move at least up to the top of the Value Zone from the current support level.

I'm looking for an end to the fall in Woodside, but can't see anything coming in the next couple of days.

As always, don't take my word - do your own research and take expert advice.

That's all for this week.

Take care.