’Tis the season for buys

WITH all the noise around the royal commission, reporting season for ASX listed companies has taken a back seat.

Resmed was first off and it was punished after releasing its report on January 24. At one stage it was down 23 per cent, which provided an opportunity to get into a great stock at a cheaper price. It has since traded up 11 per cent and looks set to continue to rise.

Reporting will continue for another week and more opportunities will arise given announcements cause high volatility, especially to the downside. But with the right stock, such as Resmed, this can spell opportunity.

The most notable report this week was AMP, which on Valentine’s Day reported a 97 per cent drop in its full year profit. There was no love from the market after that, as sellers punished the stock, pushing its share price down about 10 per cent before closing the day down 7.85 per cent.

Rather than being an opportunity, AMP is one to avoid as it is trading at its lowest levels since it floated more than 20 years ago, and unless something changes, further downside is likely.

AMP is a big elephant and they move slowly. It is not adapting to the new financial environment fast enough. Right now, the jury is out on the banks, given that after last week’s strong rise, all are down this week, which indicates they may not be ready to start their next big move up yet.

As I have mentioned previously, we will need to see the dust settle before making a decision to buy the banks, and the next month will give us the answers we need. So what do we expect in the market?

The market experienced heavy resistance about 6200, which is a level we have been watching for a couple of years as one that could halt the rise of the market.

For the past five trading days, the All Ordinaries has simply traded sideways, indicating there is indecision in the market.

In the short term, I expect a pullback over one to two weeks to below 6000 points and possibly to 5800 points.

If the market can hold above these levels and start to rise again, we will see the start of the next move up to challenge the all-time high of 6873 points set in 2007. Dale Gillham is chief analyst at Wealth Within and international best-selling author of How to Beat the Managed Funds by 20%.