Trade Update: Is Telstra Forming A Base?

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Shares of TLS have been on a protracted downtrend since mid-February when their shares traded as high as $5.22.

Earlier this week, TLS Chairman John Mullen met with institutional investors to assure them that the dividend is unlikely to be cut further.

Telstra announced in September that its 2018 full-year dividend would be reduced by 30% to 22 cents a share…..which Mr Mullen said is effectively the floor.

At the current price of $3.45, a 22 cent dividend pencils out to a 6.3% yield.

It’s our base case that most of the bad news about TLS is priced in and accumulating shares in this price range is a reasonable investment.

 

Telstra

 

Woolworths: Expect More Downside

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On August 23rd, shares of WOW traded as high as $27.75. The current price of $24.60 is over 11% lower in just over a month.

Yesterday the ACCC announced that it will delay its final decision on BP’s proposed $1.8 billion acquisition of WOW’s 527 petrol station sites.

This delay isn’t a bullish factor for the company, but we expect the deal to get over the line and support the share price.

Technically, there is a support level in the $24.20 area which dates back to January of this year. This support level could be tested in the near-term.

Woolworth’s

 

 

 

ETF Update: BetaShares BBOZ

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The XJO 200 Index continues to trade within a broad, sideways “Flag” pattern bound by the June 8th low of 5624 and the June 15th high of 5834.

The index is currently trading at 5666, which puts the key support level of 5624 within reach. A break of this level would open up range extension to the downside and find the next key target at 5578.

Investors looking to profit from a move lower in the XJO can buy the BetaShare ETF with the symbol: BBOZ.

BBOZ is an inverse ETF which means the unit price increases as the XJO Index trades lower.

BBOZ also has a 2.5% weighting, which means a 1% move in the XJO will have a 2.5% impact on the unit price of BBOZ.

The current price of BBOZ is $17.80.

We estimate that unit price of BBOZ will be $19.50 when the XJO trades down to 5578.

ASX XJO Index

BetaShare Inverse ETF: BBOZ

 

ALGO Trade Update: Sharp Reversal In Crude Oil

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The recent rally in Crude Oil reversed overnight as November futures fell close to 3% after OPEC output rose by 120,000 barrels per day during the month of September.

US drilling firms also added rigs for the first time since August, which suggests more supply coming online into the end of the year.

As a result, shares of local oil producers STO, OSH and WPL are all priced lower in early trade.

Our ALGO engine triggered a sell signal in OSH on September 28th at $7.10. If Crude Oil extends its correction lower, we would look for the next key support level near the September 9th low at $6.50.

A sell signal for STO was generated on September 26th at $4.20, which is developing slowly with a downside target near the August 18th low of $3.35.

We didn’t get a sell signal in WPL, however, we would expect a break of the $29.00 level would extend down to the $28.30 level in the near-term.

 

Oil Search

Santos

Woodside Petroleumosh

 

 

 

RBA Preview: Will The AUD Get A Mention?

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The RBA has left overnight rates at 1.50% for the last 14 months. The overwhelming consensus is that they will leave rates unchanged at their meeting today.

RBA chief, Phillip Lowe, has been clear that even though other G-7 central banks are planning to lift rates in the future, that is not the path for Australia.

With no expectations of an adjustment in rates, the market will focus on the board’s monetary policy statement.

Since the the RBA last met, there have been sharp falls in the prices of Iron Ore and Coal. In addition, the Chinese Sovereign credit rating has been downgraded.

Considering that the AUD/USD has traded modestly down to .7800 on the back of those developments, Mr Lowe could include comments on the level of the currency in the statement.

Investors looking to profit from a lower AUD/USD can buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the price of YANK increases as the AUD/USD trades lower. It also has a weighting of 2.5%, which means the unit price will fluctuate  by 2.5% for every 1% change in the AUD/USD exchange rate.

With a current price of $13.10, we calculate that the price of YANK will be near $16.50 as the AUD/USD returns to the January low of .7160.

BetaShare ETF: YANK

 

 

ALGO Sell Signal: Macquarie Group

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During a thin, pre-holiday trading session on Friday, all the major banking names bounced off their intra-day lows.

Into the close of ASX trade, our ALGO engine triggered a sell signal in MQG at $90.90.

MQG peaked on May 8th at $96.30; the day before the government announced the banking levy. Subsequently, the shares dipped to $82.30 on September 8th.

With all the local banking names facing headwinds in core revenue growth going forward, we consider the rebound in MQG shares as corrective in nature.

As the chart below illustrates, a trade back to the June 20th high of $91.45 would signal a “double top” and likely be met with selling interest.

With internal momentum indicators showing an “overbought” condition, we see scope for MQG shares to retest the $83.00 level over the medium-term.

Macquarie Group

Domino’s Pizza Isn’t Delivering

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Our ALGO engine originally triggered a sell signal for Domino’s Pizza on July 25th at $58.00. Another sell signals was triggered on the close yesterday at $45.80.

As the chart below illustrates, the dominant chart pattern in the stock is the 13% gap lower between August 14th and 15th.

This gap lower coincided with Domino’s rollout of their new “Quality Fresh” promotion. Early numbers from the company haven’t shown that the “premium” pizza promotion has been a success.

Yesterday’s sell signal is just inside the gap area and fits into the “lower high” chart formation.

A reasonable downside target on DMP over the medium term is $38.00.

Domino’s Pizza

 

 

Gold Is Weak, Just Before Golden Week

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After trading as high as $1358.00 on September 8th, the spot gold price has dropped close to 6% posting a low of $1277.00 during last night’s London session.

Several global-macro reports suggest that higher US interest rates combined with a stronger US Dollar were primary drivers of the yellow metal’s move lower.

However, daily charts show that in the lead up to Chinese Golden Week, the price of spot gold has dropped between 5% and 8% every year for the past four years.

In each of those years, the Spot price rebounded to make new highs over the course of October.

On September 20th, we posted that Newcrest Mining was a reasonable buy in the $21.80 range.

Looking forward, we expect the $21.00 area to offer good support for a move back into the $24.00 area into the end of the year.

Newcrest Mining

 

ALGO Update: Crown Is Back In The Buy-Zone

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Shares of Crown LTD have drifted back into the lower part of the $11.00 handle, which we consider a buy zone.

Our ALGO engine triggered a buy signal on August 8th at $11.43, and again at $11.15 yesterday.

We acknowledge that the recent gaming numbers from the WA casino were down, and that the general tone in the ASX 200 is soft.

However, we still see reasonable growth potential in CWN going forward and have a medium-term target of $12.80.

Crown LTD

 

ALGO Signal: Sell CSR

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At the close of trade yesterday, our ALGO engine triggered a sell signal on CSR at $4.58.

This is the second sell signal in just over a month as shares of the building supply company are still trading within a “lower high” formation dating back the all-time high price reached at $5.25 on May 9th.

Fundamentally, much of the recent price rise could be attributed to the two hurricanes which passed through the USA, but that looks to have run its course.

Further,  earnings growth per share for CSR  is expected to fall up to 14% over the next three years.

With the recent EPS at 35 cents, this expected contraction could drag EPS down to 30 cents.

As such, our downside target over the medium-term is $3.70.

CSR