NCM Remains Firm After Lower Production Guidance

Shares of NCM have reached a six-week high of $20.92 even though the mining giant has cut its full year gold output forecast.

The lower production guidance is mainly on the back of a tailing dam collapse which halted operations at its Cadia mine in NSW. Cadia is NCM’s biggest and lowest-cost mine.

NCM produced 575,791 ounces of gold in the three months to March 31, down 6%  from the previous quarter.

The miner now expects full year gold output to be between 2.25 and 2.35 million ounces, down from its previous estimate of between 2.4 and 2.7 million ounces.

We believe that NCM has more upside potential as the price of Gold remains stable above $1300.00 and the AUD/USD has just dropped 3% over the last 10 days.

Technically, the next resistance area is near the chart gap at $21.15. Above that level will point to the March high of $22.30.

NCM is part of our ASX Top 50 Model Portfolio.







WTI Crude Oil Retreats From 4-Year High

Over the past three weeks, the price of WTI Crude Oil has rallied over 12% and posted a four-year high at $69.35 in early NY trade last night.

However, WTI closed the session down 1.4% at $67.70 after the US and France announced they were close to reaching a deal to renew the Iran nuclear agreement, and a surprise increase of a million barrels in weekly API inventory data.

It’s worth noting that speculators have amassed a very large net long position in the WTI futures market. As of the April 17th report, the non-commercial net long position stood at 728,000 contracts.

This long exposure is just below the record high of 739,000 contracts set in early February when WTI peaked at $66.30.

Technically, the daily internal momentum indicators for WTI are stretched but not yet overbought.

The deadline for renewing the Iran agreement is May 12th. It’s likely that the  ongoing negotiations of that agreement will have a strong influence on the near-term price action of WTI.

From a “cause and effect” perspective, any political hurdles in extending the Iran agreement will see WTI trade higher, while the perception of a successful agreement will likely push WTI lower.

Local shares OSH, STO and WPL have all rallied sharply over the last three weeks and have a strong correlation to crude oil prices.

As such, we urge investors to be cautious of increased volatility in the crude oil market and how it could impact these local oil names.

WTI Crude Oil

Oil Search

Woodside Petroleum







Bank Royal Commission Update

Local banking stocks have found a slight bid in early trade today. However, we expect more downside price pressure as the Bank Royal Commission proceeds.

So far, we’ve seen evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including bribes, forged documents and repeated conflict of interest in insurance products.

It seems that the banks discovered long ago it was highly profitable to sell their customers financial advice and financial products.

If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.

This model was called ‘vertical integration”, which is inherently a conflict of interest.

With earning season approaching, we believe there will be some buying interest from longer-term investors.

We will keep a close watch on banking shares and advise which names have met our ALGO price criteria to hold in investor portfolios.





Telstra Still Leads The Telco Pack

Shares of TLS have been in a basing pattern above the $3.00 level and there are solid fundamental reasons for accumulating shares in this current range.

Since the share price has slipped over 17% over the last 12 months, the current yield is now close to 10%, including the franking credits.

Mobile is the company’s biggest earner and its most important revenue stream. TLS added 235,00 net new retail customers in  H1 compared to 200,000 a year ago and only 18,000 in the June half of 2017.

A recent analyst research letter forecasts the continued dominance in the Telco space, as well as diversification into other data streams will lift the share price into the $4.60 area over the medium-term.

As such, we continue to favor the long side of TLS for value investors looking for growth and a solid dividend.





Shares Of SGR Continue To Firm

Shares of SGR continue to show an upward bias after finding solid buying support near the $5.00 area last week.

A research piece from a local analyst noted that the strategic agreement with two HK-based joint venture partners, signed in March,  would boost the share price back into the $6.10 to $6.25 range over the medium-term.

Our ALGO engine triggered a buy signal in SGR on April 12th at $5.11.

The technical picture improved last week with several internal momentum indicators now pointing higher.

Star Entertainment Group




Sydney Airports – generating 10%+ cash flow

Sydney Airports reported March quarter traffic growth of 6%, with International up 11% and domestic up 3.5%.

Total passenger volume was up 4% on the same time last year.

We’re comfortable buying SYD and selling a $7.00 call option to enhance the yield.

A combination of the dividend and the option premium is generating 10%+ cash flow on an annualised basis.

SYD goes ex-div on the 29th June for 16.5 cents per share.



S&P/ASX 200 Index finished the week up 0.7%

The S&P/ASX 200 Index finished the week up 0.7%. The best performer was the Materials sector, up 3.4% and the worst performer was the Financials sector, down 1.0%. 

The XJO Index has formed a “lower high” formation at 5900. The cascading lower highs in 2018 continue, which is generally a bearish price pattern.

XJO Index
Dow Jones Index