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Banks are set for a medium sized run to a top. Let’s go straight to the charts:
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This is a classical Elliott setup for a run. We ‘think’ wave four is complete but, as you know, there are no guarantees in investing. In all probability, it is complete. The run is likely to be about a 7-10% move. This is not huge but it is relatively safe and risk can be managed.
We should always tread warily and so we look at other indicators and not just rely on a single signal. The next one I always look to is ‘On Balance Volume’:
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I am a little wary that OBV is pointing lower when the index has moved higher. This is a negative divergence and not a positive but I have seen such divergence before. The market can still head higher.
Next I look at Bollinger:
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Again, this is classic Bollinger. The bands are moving sideways and are more than likely setting up for an upwards break out, like a spring uncoiling.
Now let’s have a look at the charts of the big four:
ANZ has a possible run of 15%:
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CBA does not look quite so robust – note the Oscillator:
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NAB continues to flounder:
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WBC looks sound:
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So I favor ANZ and WBC but you should do your own homework!
I am writing this on Wednesday, 12 September and you will be more than likely read this on the weekend, or at least before the new trading week. While three days will have elapsed, there will be moves up and down and still time to get in. This run is more than likely to complete in the second half of November but each stock will display different characteristics.
Enjoy the ride
Tom Scollon
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