September the worst month
Page 3 of 8
Technical Recommendation: Hold
(Click here for CSL fundamental research and company information)
CSL was reviewed in mid August and a Reduce rating put forward.
The stock had tested its all-time in late July and then retreated, a medium-term Sell signal was in place, and although price was holding above the 56DMA, the daily stochastic had broken below the 'signal line'. After a 65% gain from the September 2011 lows, risk had shifted to the downside. I suggested at the time 'the anticipated weakness would not alter the longer-term positive profile, but it would present investors with a lower-risk entry level'.
Well the stock obviously bounced from the support of the 56DMA and has since powered ahead, breaking above key resistance and registering new all-time highs. So what next?
You can't argue with the price action, or the volume characteristics, but with the broader market at a significant resistance level, and with the US market also facing resistance, I think that some caution is warranted. Despite that caution, the stock is upgraded to Hold; although there is no harm in taking profits after a 72% gain in just under 12 months.
A break below $41.91 would be the first sign of trouble, with a break below the 56DMA at $40.30 pushing the stock back into Sell mode.
Note that any weakness would be viewed as a normal correction within the ongoing bull market.
(click image to enlarge)