BHP Assets Are In Play

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Shares of BHP have opened firmly above $24.00 as overnight comments from Andrew Mackenzie confirm the company is likely to spin off some assets in the near-term.

Mackenzie was addressing a major mining conference in Barcelona when he gave the strongest indications yet that BHP might be giving ground to New York hedge fund Elliott Management’s aggressive bid to break up the mining giant.

As such, we see this development as underpinning the stock, even as Crude Oil and Iron ore prices remain in the lower end of their 6-month trading ranges.

The ALGO engine triggered a buy signal for BHP on May 5th at 22.50. Over the last few days, we have suggest taking profits on long positions above $24.00 and looking to re-enter at lower levels.

NAB Shares Still Pointing Lower

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On May 4th, we posted a report that the NAB’s H1 results would likely lead to a sell off back to the January lows of $30.50.

After going ex-dividend today, NAB shares have traded down to $31.65. A combination of the new bank levy and increased bad debt provisions will likely continue to weigh on the stock price.

We maintain our $30.50 target and suggest buying put options into June or selling covered calls to enhance portfolio returns.

 

Cyber Security ETF: HACK

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With a widespread ransomware attack hitting thousands of computer systems over the weekend, we expect increased interest in the cyber security Exchange Traded Fund with the symbol: HACK.

HACK is made up of the leading companies in the global cyber security sector. These stocks include Symantec, Check Point and Cisco Systems.

This ETF started trading in September of last year and offers investors exposure to a diversified portfolio of the world’s largest cyber security companies in a single transaction.

BetaShare ETF: HACK

 

VIX Index Posts New Record Low

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The US stock Volatility Index, or VIX, is the industry benchmark for measuring the implied volatility for stocks in the S&P 500 index. It’s often referred to as the “fear index.”

The VIX is a non-directional indicator, since market volatility will increase whether the S&P Index  trades higher or lower.

A low number suggests low volatility, and a low level of “fear” that the collective stocks in the S&P 500 are going to stage a sharp move in either direction.

As of Friday’s NY close, the VIX has settled below 11.00 for 15 consecutive trading sessions. This is the longest streak of market complacency since the VIX started trading in 2004.

VIX Index

 

US Big-5 Worth Close To $3 Trillion

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Since the US election in November, the 5 biggest stocks on the NASDAQ: Amazon, Apple, Facebook, Google and Microsoft have gained an extraordinary $675 billion in market capitalization.

This move higher pushes their collective valuations to close to $3 trillion, or over 10% of the entire US market.

To put this into a global context, that’s more than the total value of stocks in any single equity market worldwide except the UK, China, Japan, Hong Kong and the USA.

BHP: Resistance In The $24.00 Area

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Since posting an intra-day low at $22.50 on May 5th, shares of BHP have lifted over $1.00 to $23.85.

Against a back drop of weakening fundamentals in the Iron Ore and Coal markets, we see this corrective move higher running into resistance in the $24.00 area.

General market downside risk is also adding to our interest in placing orders to exit long positions in BHP at $24.00 going into the weekend.

ALGO Sell Signal in Brambles

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The ALGO engine triggered a sell signal on Brambles at yesterday’s close near 10.50.

We don’t see a tremendous amount of downside in the stock with good price support in the $9.60 area.

Internal momentum indicators on the daily charts confirm the ALGO signal and a near-term overbought condition.

We have been suggesting that clients holding long positions take profits or write covered calls in the $11.00 strike price.

Banks Reverse Levy-Related Plunge

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Shares of the major banks dropped sharply at yesterday’s open as  budget-related fears triggered intra-day volatility rates not seen in the banking names for over 2 years.

Prices rebounded throughout the trading session in what we consider technical , value-related buying, which substantially pared the early losses.

The strong reversal in share prices triggered the ALGO engine to give buy signals in ANZ, CBA, WBC .

Given the murky outlook for earnings growth, and increased bad-loan provisions across the banking sector, we only expect the recent price action to form a 50% retracement of the recent losses, at best.

Commonwealth Bank

CBA Under Pressure

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CBA, Australia’s largest bank, posted an un-audited Q3 profit of $2.4 billion for the three months ending march 31st.

This is up 4.3% from last year’s number of $2.3 billion. The level of bad debts rose to $6.7 billion compared to $6.3 billion a year ago. CBA shares opened over 2% lower at $83.30.

The ALGO engine gave buy signals on the 5 major banks during the last several months. Over the last several weeks, we have been suggesting that based on future growth prospects, the banking names were fully valued.

We will watch for ALGO buy signals over the near-term as the banking sector sell of extends lower.

Has Gold Found A Bottom?

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The Spot Gold price hit a high of $1290.00 on April 17th. Over the last two weeks, the price has dropped over 5% to close just over $1227.00 in late NY trade.

During the same time, the share price of Newcrest Mining has dropped over 20% from $25.30 to $20.10 at Friday’s ASX close.

The closure of the Cadia mine has had a multiplying effect on the share price; which was already feeling the pressure of lower spot gold prices.

The daily chart patterns in both Gold and Newcrest are showing technically oversold conditions. At current prices, we consider both assets good value for a medium-term reversion trade to $1260 and $22.75, respectfully.  Newcrest