Medibank is trading near the $3.00 support level.
We see little in the way of earning growth over the next 12 months, however, with stock now on a 4.2% dividend yield, we expect to see renewed buying interest.
We recommend overlaying a covered call strategy to generate 10 – 12% cash flow on an annualised basis.
Buy near the support zone and look for a rally back to $3.15 before setting the call strategy.
Medibank Private
The XJO is trading into a weak price structure following a series of lower high formations.
XJO
Hearings in the long awaited banking Royal Commission start today with the examination of evidence and some questioning of witnesses.
The main focus for will be in the mortgage segment of the banking business, which includes over $1.7 Trillion in residential mortgages.
We believe one of the pricing risks to the banking shares revolves around the alleged $500 billion in “liar loans”: or loans which have been made using false information.
What’s worse is that over $92 billion of these loans are alleged to have been generated by bank officials falsifying information.
We believe the impact of the Royal commission has already been priced in to a degree. However, we still see the price risk going forward skewed to the downside.
The chart below of the BetaShare ASX Financial ETF illustrates the current neutral reading in the local shares.
BetaShare QFN ETF
Since posting a two-year high of $37.00 on February 27th, shares of CTX have dropped close to 12% to reach $32.60 in early trade today.
Much of this down move has been in response to its full year results, which saw operating profits only marginally rise above their guidance.
We sold the May $36.00 calls for shareholders on February 28th for $1.00.
Those calls are worth about 35 cents today and investors will get paid the 61 cent dividend.
We don’t currently have a buy signal for CTX. However, based on the recent price action above the key support area of $31.50, we expect to see one soon.
CalTex
Shares of NCM have dropped over 5% in early trade reaching an 8-month low of $20.30.
The selling pressure is in response to the weekend news that the Cadia mine west of Sydney has been closed due to a failure of an embankment at a tailings storage area.
Initial investigations suggest the break in the wall is related to 2 local tremors, of 2.7 magnitude, which struck the region on Friday.
NCM officials have released a statement today saying that no tailings will reach the local environment, but that 2018 production guidance could be impacted.
Based on the information disclosed so far, we don’t expect a protracted production halt at Cadia like after the seismic event in April of last year.
As such, we believe that increased production efficiency at the Lahir mines in PNG combined with an upward trajectory in Spot Gold prices will see NCM shares stabilize above the $20.00 support level.
NCM is part of our ASX Top 50 model portfolio and we believe adding to long positions in the $20.40 area is a reasonable strategy.
Newcrest Mining
We’re watching FXJ and TPG as potential short trades: Selling at a higher price and buying back at a lower price.
FXJ – Short with stop loss back above $0.79
TPG – short with stop loss back above $6.37
We recommend buying Link Holdings and placing a stop- loss below the recent $8.25 support level.
Link goes ex-div $0.07 on the 27th of March.
Our ALGO engine triggered a buy signal for BHP into the ASX close at $28.35.
The “higher low” price structure is referenced to the $26.90 low posted on December 8th.
BHP’s share price has dropped 10% over the last 8 trading sessions as concerns about the company’s proposed sale of shale assets has somewhat clouded their future earnings outlook.
During a webcast on Friday, CFO Peter Beaven reminded investors that BHP has a policy of paying out at least 50% of profits in dividends and increased that to 72% in the December half.
With respect to the shale assets, one analyst report suggested that for every $1 billion of proceeds from the sale, BHP can return 24 cents per share.
Technically, we see good price support at the $27.85 level and an area of initial resistance at $30.15.
BHP
It’s always interesting to look at the index re-balancing and think about the names that have been removed or added in the index rankings.
QBE has a negative price structure and an Algo Engine sell signal.
S32 has an Algo Engine buy signal and is a core holding in our ASX Top 50 model Portfolio. As of March 19th, S32 will now move into the ASX Top 20 model.
We suggest readers look at the charts of the two new additions to the ASX100 index, CWY and XRO.
We recommend buying ORG Energy when the short-term indicators turn positive. We expect the entry level will be confirmed early next week.
Keep this one on your watch list.
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