au stock focus potential pull back looms from suncorp 2692472017

Since our last report on Suncorp Group dated on 02 February 2017, it had rallied as expected and hit  the lower limit of our upside target/resistance zone at 14.70/95 today (printed a high of 14.72, a new 52-week high). Click here for a recap on our previous report.

The recent run-up in since 09 May 2017 has been also been reinforced by a rotation out of the “big four” banks; Westpact, ANZ, NAB and CBA due to new levy of six-basis point charge on the big banks’ liabilities that will kick-start on 01 July 2017 as per announced in the 2017 government budget.

The levy will only affect banks with assessed liabilities of $100 billion or more. It does not apply to superannuation funds or insurance companies, thus Suncorp is likely to benefit its regional banking business at the expense of the “big four” banks due to its exemption of the levy.  

Now, let’s us take a look at the latest technical elements of Suncorp.

Technical Outlook on Suncorp Group (ASX: SUN)

(Click to enlarge chart)

Key technical elements

• The recent push up in price action has reached a significant medium-term resistance zone of 14.70/14.95 which is defined by the upper boundary of the ascending channel in place since 11 February 2016 low and the 1.00 Fibonacci projection of the up move from 11 February 2016 low to 08 August 2016 high.
• Current price action has formed a daily bearish “Shooting Star” candlestick pattern right the lower limit of the aforementioned resistance zone of 14.70/14.95 which indicates that the current rally from 05 April 2017 is overextended and faces the risk of a medium-term (1 to 3 weeks) pull-back in price action.
• In addition, the daily RSI oscillator has also reached an extreme overbought level of around 81% since19 August 2014. Interestingly, this extreme RSI overbought level also coincides with current significant major swing high of 15.37 (before a 34% decline occurred that printed a low of 10.11 on 11 February 2016.
• Significant medium-term support now rests at the 13.95/74 zone which is defined by the former range top from 30 November 2015, pull-back support of the broken descending trendline from 07 November 2014 high and the 38.2%/50% Fibonacci retracement of the recent rally from 05 April 2017 low to today’s high.

Key levels (1 to 3 weeks)

Intermediate resistance: 14.70

Pivot (key resistance): 14.95

Support: 13.95/74

Next resistance: 16.10/45

Conclusion

Therefore, the current up move seen in Suncorp has appeared to be “overstretched” and as long as the 14.95 pivotal resistance is not surpassed, it may see a medium-term pull-back in price action to target the 13.95/74 support zone.

On the other hand, a break above 14.95 is likely to invalidate the preferred bearish pull-back view for a continuation of the up move to test the next resistance at 16.10/45 (major swing high area of Feb/May 2008 & the 61.8% Fibonacci retracement of the steep fall from Oct 2006 high to March 2009 low).

Charts are from eSignal

Disclaimer

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs. While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments. City Index recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets. It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com.au, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. GAIN Capital Australia Pty Ltd (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.