Telstra Higher on ACCC Ruling

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Telstra shares got a boost today as the ACCC decided against letting rival Telcos roam their regional mobile network at a government fixed price.

Some analysts have estimated that mobile communications contributes about 45% of earnings, or $4.2 billion, in 2017/18. Telstra shares have jump by over 4% to reach $4.45 in early trade.

On April 20th, we wrote a blog piece about how TLS at $4.00 per share represented close to an 8% yield on their 15.5 cent dividend. We see value in the stock up to $4.50 keeping the forward yield in the 7.00% area.

NAB Posts Mixed Results

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NAB announced a 2.3% increase in its H1 cash profit to $3.29 billion, which was largely in line with the street’s expectations, but much better than the $1.74 billion loss for the March 2016 half-year result.

While cash earnings grew, net interest margin fell 11 basis points to 1.82%. Charges for bad debts were up 5.1% to $394 million.

The bank maintained its interim dividend at 99 cents per share, fully franked.

Shares of NAB raced to a high of $33.80 at the open but have now settled back into the low $33.00 handle. Our near-term target is around the January lows of $30.50.

 

Facebook Falls On Lower Ad Revenue Growth

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Shares of Facebook are down 2.4% in aftermarket trade to $148.00 after the social media giant released positive earnings, but fell short on expectations of future advertising revenue growth.

The company reported earnings of $1.04 per share on $8.03 billion in revenue versus 60 cents per share on $5.38 billion in revenue in the same period last year.

However, CFO David Wehner repeated his comments from last quarter that advertising revenue would come down “meaningfully”, while payments and other fees revenue fell 3% to $175 million on a year-on-year basis.

Considering the stock has gained over 20% since the beginning of the year, a move back into the $135.00 handle looks like a reasonable downside target.

Facebook

Crude Oil Dips Below $48.00

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West Texas Intermediate Crude Oil prices dropped below $48.00 for the first time in over a month as rising output in the USA, Canada and Libya have more than offset the production cuts agreed to by OPEC members last November.

At one point in the NY session Crude prices were over 3% lower to $47.40 before weekly US inventory data lifted the market back over $47.90.

we have been following the BetaShare Oil ETF called OOO. It has traded in a wide range between $17.50 and $13.80 this year as crude prices have fluctuated.

Apple Shares Drop On Weaker Q3 Guidance

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Shares  of Apple are trading 1.8% lower in aftermarket trade after a mixed report which beat earnings targets, but fell short on earnings and sales guidance.

The company announced an adjusted EPS of $2.10 versus expectations of $2.02 per share.

However, the revenue number of $52.9 billion was less than the street’s expectation of $53.02. Further, revenue guidance for Q3 has been revised down from $45.6 billion to $43.5 billion.

In addition, gross margins for Q3 are also pointing lower to 37.5% from 38.5%.

Taking into account the 20% rally the stock has seen in calendar 2017 from $118.00 to $147.00, a pullback into the $138.00 handle is a reasonable target.

RBA Preview: Aussie Dollar Still Trending Lower

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The Reserve Bank is expected to keep the official cash rate unchanged tomorrow, ahead of the federal government’s budget next week. Over the weekend, fresh concerns emerged that China’s economic recovery might not be as strong as expected, which may also be included in the RBA’s statement.

The consensus is that the 1.5 per cent benchmark interest rate will remain on hold, but some analysts believe it could be raised in the next few months with the domestic economy more resilient than ­expected.

However, renewed signs appeared yesterday that China’s economic growth trajectory could prove more volatile in 2017 than first thought after a surprising fall in manufacturing output.

It’s our base case that the RBA still maintains an easing-bias, and that the next move on rates will be lower. As such, we expect to see a protracted move lower in the AUD/USD, with a medium-term target near the January low of .7150.

We have suggested that investors looking to profit from a lower AUD/USD can buy the BetaShare YANK ETF. This an an inverse ETF, with a 2.5% weighting, which gains value as the AUD/USD trades lower.

Chart – YANK ETF

ALGO Signal Update: Take Profits In ANZ

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The ALGO engine gave a buy signal for ANZ on February 7th at $28.80. During yesterday’s session, the stock traded up to $32.85; within 20 cents of the $33.03 high posted on August 4th, 2015.

Looking back at that price action, after ANZ traded over $33.00 in August of 2015, the share price fell to $26.40 during the next three weeks.

That type of sell off is not our based case. However, with almost a $4.00 profit since the ALGO buy signal at $28.80, investors may want to consider taking profits or write covered calls on ANZ above $33.25.

The ALGO engine has given many profitable signals in the market, in general, and in the banking sector, specifically. We will look for the next buy signal to enter ANZ on the long side again.

Based on internal momentum indicators, $30.00 is the initial level of price support.

ANZ

Take Profits In Suncorp

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The ALGO engine gave us a buy signal on Suncorp on January 23rd at $12.92. Yesterday, the ALGO engine generated a sell signal at $13.77.

We suggest that investors who took advantage of the buy signal use this recent price increase to take profits or write covered calls above $14.00.

Technically, the $14.00 level has proved stiff resistance dating back to January of 2015.

Furthermore, the ALGO engine has generated exceptional signals for capturing the medium-term trading ranges for Suncorp.

Suncorp

 

AUD Slips Lower After Neutral CPI Data

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Inflation in Australia remains flat, and below the lower end of the 2% to 3% RBA target band.

Many analysts were expecting an uptick in the CPI inflation reading to 2.3%, which could prompt the RBA to shift its neutral-bias to a tighter posture.

As a result, the AUD/USD fell to  a 3-month low of .7455 overnight. With the RBA meeting next week, any mention of a more benign inflation outlook would put more downside pressure on the Aussie.

Internal price indicators now point the the next support level at .7420 and a more significant target of .7365 over the near-term.

Over the last few weeks, we have been suggesting that investors look to buy the BetaShares YANK ETF to profit from a falling AUD/USD.

The YANK is an inverse ETF, with a 2.5% weighting. This means that YANK will gain 2.5% for every 1% drop in the AUD/USD.

Oil Search Points Lower On Weaker Crude Prices

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After falling over 7% last week, WTI Crude Oil dropped another 1% last night to trade at a four-week low of $49.05.

Concerns of oversupply in both Crude and Gasoline are dragging prices down as both products are now trading below their 30 and 50-day moving averages.

This weakness in both the technical and fundamental indicators will likely put downside pressure on the shares of Oil Search.

On April 19th, Oil Search announced a quarterly report which showed a 2% decline in total production for the March quarter, along with a 1% decline in total sales revenue.

Based on these data sets, we would expect OSH shares to trade back down to the initial support at $6.70 in the near term.

Oil Search