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With the All Ordinaries Index recently dropping over five per cent in just a few days, panic set in, with many declaring, “The market is crashing.” While numerous stocks took a hit, it’s crucial to remember that a falling market doesn’t mean all stocks decline. In fact, several stocks posted gains during this period. So, which stocks defied the trend? and do they present a buying opportunity right now?
Before we delve into that, let’s discuss the recent decline. The direction of the market is heavily influenced by the top 20 stocks, which together make up over half of the total index in terms of market capitalisation. The simultaneous sell-off of most of the top 20 stocks has been the main driver behind the index’s drop.
However, not all stocks fell. Two stocks in the top 20 bucked the trend, indicating that buyers were unwilling to let them go during this recent market turmoil. This strength amidst panic shows not only stability but could signal a potential buying opportunity, so let’s take a look.
Two stocks that bucked the trend
First up is Rio Tinto Ltd (ASX: RIO), which ended last Monday up 2 per cent. This resilience was supported by a positive half-year report on 31 July, showing that buyers were willing to pay a premium for RIO shares even during a broad market sell-off.
Next is Northern Star Resources Ltd (ASX: NST), which posted a 1.72 per cent gain by the end of Monday. The stock has shown strong support around $14, and if it can rise above $14.70, all signs point to further gains in the medium term.
Given the current economic environment, with interest rates precariously balanced and global instability on the rise, extended volatility is likely. Therefore, holding resilient stocks like these in your portfolio can significantly enhance performance in the current market conditions.
What are the best and worst-performing sectors this week?
The best performing sectors include Information Technology and Real Estate, which are both up over four per cent, followed by Consumer Discretionary, up over three per cent. The worst performing sectors include Healthcare, Materials and Utilities, which are all up over one per cent.
The best performing stocks in the ASX top 100 include Seek Ltd (ASX:SEK) and Technology One Ltd (ASX:TNE), up over nine per cent, followed by IDP Education Ltd (ASX:IEL), up over eight per cent. The worst-performing stocks include Fortescue Ltd (ASX:FMG), down over six per cent, followed by Arcadium Lithium Plc (ASX:LTM), down over five per cent and IGO Ltd (ASX:IGO), down over two per cent.
What’s next for the Australian stock market?
What a difference a week makes! Last week, the market reached a new all-time high, despite a late sell-off on Friday. This week, the All Ordinaries Index experienced a further sell-off of over 4 per cent, causing widespread panic.
With this fall, the market is now back at the crucial 7,900 point level, which has acted as strong support since February. In fact, this level has been tested five times this year, and each time, buyers have stepped in, taking the market to new all-time highs shortly thereafter. So, will we see a repeat of the buyers taking the market higher?
A major clue to watch for will be how the All Ordinaries Index closes this week. A strong close above 7,900 points could signal a rebound back up to 8,300. However, a close below 7,900 points could see the market continue to drop to somewhere between 7,700 and 7,500 points.
It’s important to note that the largest stocks in the materials sector held up quite well this week, with some even posting positive returns during the market downturn. In my previous report, I mentioned that the materials sector might have found significant support, which would create further upside in our market. This week’s events strengthen that view.
Meanwhile, the financial sector fell sharply, but given it has been among the strongest performers all year, a pullback was well overdue.
So, if the recent sell-off was merely a normal pullback as the market gathers momentum, be prepared for a strong rise and further buying opportunities in the coming weeks.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%.
He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.
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