Recent Algo Signals
We continue to like the setup in CTX, WOW and IPL. We also feel that TCL and SYD are now approaching oversold levels.
Gold Update: Look To Buy Near $1200.00
Over the last 7 months, Gold has traded in a broad range between $1200 and $1300.
As inflation, interest rate expectations and equity market risks have fluctuated over that time, so has the price of Gold.
On balance, we expect the $1200.00 support level to hold and find buyers as the yellow metal moves back to the top part of the recent price range.
Investors looking for the price of Gold to move higher can look to buy NCM, EVN or the BetaShare Gold ETF with the symbol: QAU.
Spot Gold
Caltex – Price Support
FY17 refining margins have improved from last year after averaging US$12.40 versus US$10 over 1H16.
We expect CTX stock price to find support at the current price level and trade higher off the back of the earnings result announced in August.
Assuming DPS of $1.15, we have CTX on 3.7% yield, and when complimented with a covered call, we ‘re delivering 10 – 12% annualised cash flow.
Chart Update – XJO
The S&P/ASX 200 Index finished the week down 0.31%. The best performer was the Materials sector, up 2.1% and the worst performer was the Health Care sector.
The XJO remains below the recent 5850 “lower high” formation, as displayed on the graph below.
ALGO Update: Buy Signal In CIMIC Group
Our ALGO engine triggered a buy signal in Cimic Group yesterday on the ASX close at $38.20.
After posting a new 52-week high of $41.10 on May 24th, shares of CIM had pulled back over 8% to 37.50 before recovering into Friday’s close.
A report that CIM is preparing to offload its 23% stake in Macmahon Holdings and restart its share buyback plan helped the stock find buyers.
This, combined with the credit rating upgrade from S&P in late May, gives CIM a positive outlook going forward.
At 23x earnings, the shares are mildly expensive, but the upside potential to $41.00 sets up a reasonable “buy/write” investment opportunity.
CIMIC Group
Algo Buy Signal – Transurban
Our Algo Engine has flagged a buy signal in TCL with the price trading at or near $11.60.
With a 10% underlying dividend growth supported by free cash flow, we feel TCL should trade back up into the $12.25 level, as bond yields retrace from their current short-term rally.
ETF Update: Exit The OOO Crude Oil Trade
Despite a larger-than-expected fall in US Crude Oil inventories, the price of West Texas intermediate (WTI) Crude Oil failed to hold the recent gains above the $45.50 level and looks to be rolling over.
The US EIA reported that crude oil in storage fell by 6.3 million barrels versus an expected fall of 2.3 million barrels, which pushed WTI up to an intraday high of $46.25.
However, news that OPEC producers have not agreed to renew their production cuts has prompted investors to believe that Crude Oil supplies are not going to balance in the near term.
We suggested buying the BetaShare Oil ETF with the symbol, OOO in the $12.35 area on June 22nd. We now suggest closing that position in the $12.75 area and looking for another opportunity to enter the market on a test of the $41.00 level.
BetsShare OOO
Sydney Airports – Approaching Buy Signal
Sydney Airports is approaching buying support at or near $6.60. We see anywhere in the $6.60 – $6.90 range as a reasonable entry level.
Adding covered calls into Sept – Oct will help boost cash flow, whilst waiting for the next dividend period in late December.
ASX – Second Half Activity Trends
Weaker than expected activity trends in June led to small earnings downgrades by most analysts.
We are now forecasting flat year over year revenue growth.
ASX is trading on 24x forward earnings which seems excessive considering the low growth outlook.
Real Estate Sector – Now Oversold
As bond yields have pushed higher in recent weeks, following global central banks hawkish tone, we’ve seen capital rotate out of yield sensitive names such as infrastructure and property and into financials & resources.
The rotation now leaves property stocks approaching an oversold price zone.
The chart below provides a broad-based picture of the listed property stocks within the ASX 200, via the SLF.AXW (SPDR ASX200 Listed Property ETF).
Our Algo Engine has triggered a buy signal at or near $12.00.
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