We feel traders should look to sell into the current price rally in BOQ.
Slowing credit growth conditions will act as a headwind to mortgage profitability and with BOQ now trading at the top end of the valuation range, any further price extension provides a good opportunity to set a position on the short side.
We have BOQ delivering flat EPS growth of $0.93 and DPS of $0.77, placing the stock on a forward yield of 5.6%
Bank of Queensland
Our Algo Engine triggered a buy signal in Crown near the recent low of $11.43.
Apply a stop-loss on a break below $11.40
Crown
Tabcorp is likely to trade higher, into the $4.50 range following independent expert Grant Samuel indicating the proposed $11 billion merger of gaming giants Tatts Group will deliver fair value for Tatts shareholders.
Tabcorp says the merger is expected to deliver at least $130 million in annual earnings from what it calls synergies and business improvements, tech integration, corporate cost savings and other consolidations.
It will take about two years to fully integrate the old Tabcorp and Tatts businesses, according to Tabcorp.
Our Algo Engine triggered a buy signal in MQG near the recent low of $82.28.
During an outlook update provided to the market, MQG re-affirmed guidance for its FY18 result to be broadly in line with FY17. Management noted that, strong revenues in the FUM business will help underpin FY18 earnings.
FY18 cash earnings of $2.3b, EPS $6.70 and DPS $4.70, represents 3 – 5% earnings growth on FY17 and places the stock on a forward yield of 5.4%.
There appears to be short-term upside price momentum from the recent signal, however, stop losses below the $82.28 low are advised.
AMC and SHL offer low risk entry points following the recent selling pressure.
FMG is a short with stop losses above the recent high at $6.05 Initial downside target of $5.40
Fortesque Metals
The Insurance sector in the US rebounded in Friday’s session, following oversold levels which were caused by concerns about weather related claims.
We’re expecting the local insurance companies to find buying support near the current price levels. This will likely be a short-term trade higher, as we anticipate the sector will then make a “lower high” formation.
Our two preferred names are IAG and SUN.
The following charts illustrate the recent Algo Engine sell signal in leading financial names, Goldman Sachs and Commonwealth Bank.
The XJO continues to trade in a “lower high & lower low” formation.
XJO
The S&P/ASX 200 finished the week down 0.34%.
The best performer was the Utilities sector, up 3.6% and the worst performer was the Telecoms sector, down 6.1%.
The XJO index remains in a “lower high” formation with resistance at 5836.
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