Ansell Gets A Boost From The Lower Aussie

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Since posting an intra-day low of $20.30 on August 15th, shares of Ansell have traded 12% higher to reach $22.81 in early ASX trade today. 

The August low coincided with their FY17 earnings report. Part of that report focused on the level of earnings based in USD and how an stronger AUD could dampen results. 

The AUD/USD has now dropped over 5% since trading at .8125 on September 8th. As a result, ANN shares have pushed higher. 

We currently see ANN trading at 18X earnings and estimate FY18 EPS around USD .95 cents. 

As such, we consider ANN a good buy/write strategy up to $23.50 to increase cash flow and enhance portfolio returns. 

Ansell

 

Big Miss In Retail Sales

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Local economists had expected Australian retail sales to have grown by around 0.3% after a flat report in July.

Instead, retail sales fell by 0.6% in August, and, adding insult to injury, revised the July report to show a 0.2% decline. It is the first back-to-back decline in five years.

Retail names HVN and JBH have both seen their share prices drop over 15% since mid-August and yesterday’s report won’t likely give them a lift.

Over the medium-term, we see scope for HVN to trade back to $3.65 and JBH to slip to $21.70.

 

Harvey Norman

JB HiFi

 

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