Although many resource names have enjoyed a strong rally over the past 12 months, there’s reason to be cautious.
To protect capital we recommend investors holding resource names, run tight stop-losses below the recent lows.
Overall, investors should be reviewing their portfolio allocations, tilting to defensive names and ensuring access to effective portfolio hedging and shorting strategies are in place.
We’ve been buyers of Caltex at the recent low and see further upside potential to $31 – $32.
We’ve been recent buyers of TAH and ANN and now look to sell covered call options.
Chart – ANN
Chart – TAH
Wesfarmers is correcting from the recent high.
The following charts show the correlation of the US bank price performance versus leading ASX banks.
A number of stocks within the ASX top 50 appear to be setting up medium term short signals.
We’re mindful of the upward bias in equity indexes, however, much of this is driven by broad inflows into index funds and valuations are becoming stretched, even if Q1 earnings in the US hit their target.
Here is a list of the names that are worth taking a closer look at….
AMP, LLC, SGP, CPU, JHX, & AGL.
The chart below shows the yield on the US 10YR bonds retracing from a high of 2.62% to now trading at 2.39%. We find this interesting given the positive commentary around US growth and market expectations for further rate rises in 2017.
The by-product of the lower US yield story has manifested in domestic yield sensitive names such as Transurban being among the best performing stocks within the ASX50.
The higher low formation at 5680 remains in place.
The higher low formation at 20,412 remains in place.
Over recent weeks we’ve watched money flow into defensive yield names such as Sydney Airports, Transurban & GPT to name a few. Telstra has somewhat been left behind and we therefore may see buying support build from the current oversold levels.
We’ve focused on the short-term chart patterns in both TLS and TPM as a point of interest. Also, we’ve included a chart of the iShares Global Telco ETF to help capture the “bigger picture” trend within the large cap global Telco companies overall share price performance.
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