Most active stocks in May

It has been a hectic couple of months, with ASX listed stocks selling off aggressively between February and March, due to the spread of Covid-19, only to start recovering over the past two months, as economies around the world begin the process of reopening. Volumes traded across the board have been extremely elevated, with the ASX reported several of their heaviest trading days in history. We wanted to look at which stocks have been attracting the most attention.

There are a couple of different ways to look at the most heavily traded stocks. To begin, we will look at the value traded, being the total amount of dollar value exchanged over the past month. Not surprisingly, looking at the highest value traded will favour the largest market cap stocks, with the likes of CSL, BHP, NAB, CBA, and APT at the top of the list. This is partly because many funds and ETFs will hold stocks in proportion to their representation in the ASX200 Index, which is a cap weighted index.

Largest ASX Stock Value Traded – Past Month

However, a potentially more informative approach is to look at what the most active stocks, which is calculated as the volume traded as a percentage of the free float. The free float refers to the total number of shares that can be publicly traded, and which are not restricted. Restricted shares can include the likes of those held by insiders, promotors, or governments that will typically have a time restriction before they can be traded.

By looking at the number of shares traded as a percentage of the free float, we take the market capitalisation of the stock out of the question. The calculation that we make is to take the daily average number of shares traded over the past month, divided by the free float, which leaves us with a percentage. When we rank the ASX200 by this measure, the following 5 stocks in the table below come out on top.

Most Active ASX Stock – Past Month

To explain these figures, Southern Cross Media (SXL) as an example, is turning over 5.42% of its entire shares each day, on average, over the past month. The reason such stocks can be of interest, is that if the shares of a company are rapidly changing hands, it tends to mean that shorter term traders are involved, instead of longer-term buy and hold investors. This in turn, often means volatility is elevated, making for good trading opportunities. Lets take a look at each of the companies share price charts:

Southern Cross Media Group (SXL)

The share price of SXL has fallen sharply this year, from levels around $0.65, to lows of under $0.10 in late March. More recently, a reversal pattern has emerged, with buyers stepping in between $0.10 and $0.20 a share. Given the recent break back above the $0.20 level, this level should now offer strong support if retested, with further gains towards $0.40 likely over the coming weeks, which would mark a 50% retracement of the January to March decline.

Webjet (WEB)

WEB is another stock that has been sold off heavily over the past few months. Being a travel company, and with global travel effectively in shutdown, they are more directly affected to the current pandemic than many other ASX listed stocks. After hitting a low of $2.25 a share in late April, the stock has rallied more than 100% over the past month, to reach a high of $4.80 this week. Despite this, prices are well below a 50% retracement of the prior decline, would is around $6.25 a share. This just goes to show how high volatility is at present. From here, further upside in the short-term looks quite limited, meaning would are looking for a correction towards the $3.50 to $3.25 region, ahead of further gains over the medium term.

Flight Centre travel Group (FLT)

FLT is not dissimilar to WEB discussed above, both in terms of the underlying company, and also the share price chart. The declines since February has well exceeded that of the broader market, with prices declining from a high of $40.72 in January, to a low of $8.56 in April. Since then, initial rallies have run into resistance in the region of $14 – $15, meaning selling pressure remains high, and a sustained move higher is unlikely for some time. In the short-term, we expect to see a move towards $12 a share, ahead of further sideways trading. A sustained break of the $15 level is needed to improve the outlook.

Afterpay (APT)

Out of all the shares covered in this list, APT has a very different price chart, in that despite a very deep decline between February and March, the price has not only fully recouped, but rallied to new all time highs. The speed of the rally off the March lows is quite extraordinary, with prices increasing 5-fold to reach a high of just over $50 a share this week. In the short-term, prices are looking very stretched, so we expect to see a retracement lower over the next 1-2 weeks, towards the $42 to $40 support zone. However, any weakness would likely to be short-lived, as a strong medium term up-trend is now in place.

G8 Education (GEM)

GEM has been another badly hit company since the Covid-19 outbreak, dropping over 70% in price between January and late March. As can be seen on the chart, the initial rally off the lows ran into resistance at the $1.20 level, while buyers are supporting the stock at $0.80 a share. This means that a clear trading range is starting to develop between $0.80 and $1.20 which is likely to last for several more weeks. Often after a sharp decline, prices need to move sideways for a period of time in order to soak up the supply overhang. In other words, there are plenty of current longer-term holders who are using short-term rallies in order to offload their shares. Only once they are exhaustive, is a sustained rally to the upside possible.