ALGO Update: Stay Short Commonwealth Bank

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Short Commonwealth Bank

Our ALGO engine triggered a sell signal for CBA on November 13th at $81.55.

Since then, the share price has dipped to $78.00 but has lifted on year-end buying to $80.40.

The internal momentum indicators are pointing lower and we expect to see a break of the $78.00 level early in the new year.

Clients who are selling CBA short on the SAXO Go platform can place a stop in the $81.70 area, with an initial profit target near the November 3rd low at $77.20

Commonwealth Bank

 

ALGO UPDATE: JHX Is Still In The Sell Zone

Posted on | by Todd | Leave a Comment on ALGO UPDATE: JHX Is Still In The Sell Zone

Our ALGO engine originally triggered  a sell signal for JHX on November 22nd at $21.50.

The chart below shows that an additional sell signal was generated at Friday’s close at $22.40.

JHX  has been grinding higher, on lower volume, with support from unexpectedly strong housing data out of the USA.

Over the last week, the US new home sales, building permits and existing home sales have all printed higher than consensus forecasts.

From a technical perspective, JHX is still following a “lower high” pattern based on the May 2nd high trade at $23.20.

With a current P/E of  30.00, the stock is on the expensive side of its industry peers and due for a material correction lower.

 

James Hardie

 

 

ALGO UPDATE: Stay Long NCM

Posted on | by Todd | Leave a Comment on ALGO UPDATE: Stay Long NCM

After posting a low of $1238.00 on December 12th, Spot Gold has moved higher and reached $1270.00 in NY Trade last night.

The response of Newcrest shares has been relatively muted, but we expect a pick up over the near-term.

Our ALGO engine triggered a buy signal for NCM on December 15th at $21.75.

We still prefer the long side of NCM, along with the smaller producers SBM, SAR and EVN, and have an upside target near the November 29th high of $24.25.

Newcrest Mining

 

 

Softer US Yields Could Lift Local Names

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The recent move higher in longer-dated US Treasuries has created a headwind for some of the yield sensitive names listed on the ASX.

Over the last 10 days, the US 10-year notes have risen from 2.28% to just under 2.50%.

This 10% move has also lifted the 2yr to 30yr spread from 85 basis points to a full 100 basis points.

The impact on local shares has been a 4.5% drop in TCL and a 3.3% fall in SYD.

Looking forward, it’s reasonable to expect the US yields to soften and the yield curve to flatten.

Given the current correlation to the local shares, we see the US flattening trade as potential positive for the local names such as TCL, SYD, WFD and GPT

US 2yr versus 30yr spread

 

Will Domino’s Deliver In 2018?

Posted on | by Todd | Leave a Comment on Will Domino’s Deliver In 2018?

Shares of Domino’s Pizza are up over 2% at $45.60 as a research report from Morgan Stanley forecasts the stock rising to $53.00 over the next 12 months.

The report suggests the recent fair-wage claims and complains from franchisees have been overstated in the sell off in the share price.

The report also points out that DMP is the third most shorted stock on the ASX, with 16.5% of the company in the hands of short sellers.

From a technical perspective we see a key price hurdle in the $50.00 area, which is the bottom of the price gap lower on August 11th.

Short-term traders looking to buy DMP should place a stop around the $44.80 level.

Domino’s Pizza

 

Negative Divergence In The XJO Index

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The last time our ALGO engine gave a signal in the XJO Index was on September 8th, 2016; this was a buy signal at 5227.

It isn’t surprising that there hasn’t been a more current signal considering that the index has traded in a wide, sideways trading range between 5650 and 5960 during 2017.

However, the recent break above 5960 has the technical structure of a “price exhaustion pattern” and could signal a correction lower into the new year.

Looking at the internal momentum indicators on the daily chart, the November high of 6052 had a corresponding RSI reading of 80.00.

Interestingly, the higher print from December 20th at 6083, had a lower RSI reading of 63.00.

This divergence in momentum suggests the index is nearing a medium-term high and could offer a shorting opportunity. The next key support level is the November 16th low at 5916.

The XJO Index is available to trade on our SAXO Go platform as both a CFD and a futures contract.

XJO Index

 

AUD Boosted By Last Week’s M&A Activity

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Last week’s Merger and Acquisition activity was a key driver in the Aussie dollar’s move from .7510 to .7690.

Tuesday’s Westfield deal for AUD 32 billion combined with Zurich’s announcement that it will buy ANZ’s life insurance business for AUD 2.85 gave the local currency a bid tone for the week.

All together, the flow was about $9 billion of AUD/USD that needed to be bought to cover the hedging aspect of the M&A transactions. This was enough to push the AUD/USD to .7690 before offers capped the move.

With this buying support absorbed into the market, the technical picture in the AUD/USD looks to be weakening with the longer-term down trend the path of least resistance.

We see the next area of support in the .7565 area. A break of the December 11th low at .7510 could trigger a quick move back to the .7300 handle.

Some of the ASX stocks that would benefit from a lower AUD include: RHC, NCM, QAN and TWE.

Ramsay Health

Newcrest Mining

QANTAS

Treasury Wine Estates