The ASX made up some ground in late morning trading after falling 0.4% early.
By midday – at time of writing – the S&P/ASX 200 had addressed its four-day low fall, to be down 0.1% at an intraday high of 7,483.
Some major players were down in morning trading. Woolworths lost 1% despite several target price upgrades, Wesfarmers was down 2.8% on cautious outlook statements and despite the good news regarding dividends, Aristocrat fell 1.5% and Pilbara Minerals suffered a big loss, diving 8.1% after JPM downgraded. Xero lost 2% as US bond yields crept up.
The banks were also feeling the heat as Wilsons downgraded the sector.
On the winner’s lists were Clinuvel up 16% on broker upgrades, Atlas Arteria up 5.6% after UBS boosted its target price and Qube rose 3.6% on broker upgrades.
Looking back at the week, we spoke with Wealth Within analyst Dale Gillham to get his take.
“It is currently the reporting season with many companies releasing their financial year results, as well as their outlook for the coming year. This tends to cause some volatility in the stock market, as companies report results that may be better or worse than expected causing share prices to rise or fall for a short period of time.
"Over the past 18 months, there has been a surge in the number of new people investing in the Australian stock market, and given there have been some surprises this reporting season, I suspect it may be driven by the increased trading from these new entrants.
"With many in lockdown, it is possible that they are sitting at home attempting to profit from the current volatility as companies report their results. For example, prior to releasing its result this week, Appen rose nearly 16% from its close on Friday, August 20 but after its announcement on Thursday that its net profit after tax was down 55.1%, it fell heavily closing over 21% lower compared to the previous day’s close.
“Infant formula company, a2 Milk was up nearly 10% last week and rose another 5% this week before falling immediately after releasing disappointing results together with a weak forecast for the coming year. By market close on Thursday, it was trading at levels where it was nine days earlier.
"Both of these stocks were previous market darlings pursued by retail investors chasing big gains with Appen rising over 350 per cent between 2018 and 2020 while a2 Milk rose nearly 150 per cent over the same timeframe. However, more recently, both stocks have been falling heavily, as they were down around 75 per cent until a few weeks ago.
“This indicates that many individuals are speculating on these stocks, however, attempting to bottom pick a stock hoping it will rise is never a good strategy, and attempting to do so based on an announcement is very hit and miss, as the above examples demonstrate.”
On the small cap front
MGC Pharmaceuticals Ltd (LSE:MXC, OTC:MGCLF, FRA:H5O, ASX:MXC) has been a huge winner today, up 43.59%. MXC has signed a landmark deal with an American drug distributor worth a minimum US$24 million over the next three years.
Aldoro Resources Ltd (ASX:ARN) was another major winner in morning trading up 22.35% after it announced it might be sitting on a world-class rubidium resource after identifying an initial exploration target within the Niobe prospect at Windimurra Project in Western Australia.
CV Check Ltd (ASX:CV1) was up 3.03%, having booked revenue for the year of $17.47 million, an improvement of 41% year-on-year.
Imugene Limited (ASX:IMU, OTC:IUGNF) was up 2.94% after welcoming the dosing schedule for the third monotherapy cohort of its phase-1 trial of the immunotherapy PD1-Vaxx on three patients.