A Runaway Train? Which Bank?

CBA has looked unstoppable over the last 12-18 months, and it currently sits just below its all-time highs made at 63.70. Many a retail investor in these lands have repeatedly viewed CBA as a prime example of overvaluation and cannot go any higher, however Australia’s biggest bank by market cap has proved those doubters wrong by breaking into unseen territory.

The big question is, for how much longer? We currently see no reason to step in front of a speeding freight train, until at least CBA’s technicals tell us otherwise.

On the daily chart (which is very similar to the weekly chart), CBA is encountering a rising wedge, suggesting that perhaps a reversal may emerge soon to give bears a shorting opportunity. However, we recommend to proceed with caution as the momentum clearly lies with the bulls from the MACD signals being shown, as a bullish cross begins to initialise. The first number obvious number to watch is 63.70 – a failure to make new all-time highs will give life to doubters. Support may be seen back at around 62.16 and its 20DMA.

If 63.70 is cleared, do not be surprised if CBA continues to test its resistance trending from September 2011 lows at around 64.50. Gathering momentum on the MACD could end up propelling CBA even higher from here and crushing the doubters further.