Ansell & Tabcorp
We’ve been recent buyers of TAH and ANN and now look to sell covered call options.
Chart – ANN
Chart – TAH
WES – Chart Update
Wesfarmers is correcting from the recent high.
Sell Oil Search Near Resistance
After posting a four-month low at $47.10 on March 27th, WTI Crude Oil has rallied to close at $51.10 today.
Shares of Oil Search have followed crude higher moving from $6.90 to a three-month high of $7.34 in early trade.
We see scope for a move back to the $7.70 level over the near-term. This would represent a “double top” technical pattern which usually serves as price resistance.
In this case, a move up to $7.70 would give investors a chance to take profits on long positions or write covered calls to enhance portfolio returns.
We recognize that the energy sector has some level of upside momentum, for now, and stocks like BHP and Origin on our buy side radar.
Chart Oil Search
RIO and BHP Are Close To Support
The share prices of RIO and BHP are both approaching key support levels which could create investment opportunities.
The are both trading below their 30-day moving averages but are close to support $58.80 and $23.50, respectfully.
The attached charts show that these support line have held and became good buying levels for a move higher over the last six months.
However, we are mindful of the importance of exports to China for both of these companies. Overnight, China’s five largest banks reported earnings which showed steady results but increases in the percentage of non-performing loans tied to real estate.
It’s worth noting that Chins’a top five banks are considered the largest in the world in terms of assets. A sharp contraction in any of those five could trigger weakness in RIO and BHP
ASX – Stocks to Watch
A number of stocks within the ASX top 50 appear to be setting up medium term short signals.
We’re mindful of the upward bias in equity indexes, however, much of this is driven by broad inflows into index funds and valuations are becoming stretched, even if Q1 earnings in the US hit their target.
Here is a list of the names that are worth taking a closer look at….
AMP, LLC, SGP, CPU, JHX, & AGL.
US 10YR Yields & TCL
The chart below shows the yield on the US 10YR bonds retracing from a high of 2.62% to now trading at 2.39%. We find this interesting given the positive commentary around US growth and market expectations for further rate rises in 2017.
The by-product of the lower US yield story has manifested in domestic yield sensitive names such as Transurban being among the best performing stocks within the ASX50.
RBA Preview
There has been plenty of Central Bank action on interest rates around the world but none of it coming from the RBA.
That trend is very likely to continue at tomorrow’s RBA board meeting where the official cash rate is expected to remain at 1.5%.
Australian monetary policy is currently stuck between underlying inflation, which is below target, and accelerating house prices.
The market may move on comments about the Aussie Dollar or the banks recent out-of-cycle rate rises, and that APRA has again slightly tightened the terms on investor lending.
As such, real estate names will be in focus after the announcement.
ASX 200 Index – Chart Update
The higher low formation at 5680 remains in place.
ETF Update: Buy The YANK
The USD Index had its strongest week in over two months as better-than-expected GDP numbers, combined with hawkish comments from FED officials, lifted the Greenback against all the major currency pairs.
The bulk of the gains were against the EURO and YEN, with the AUD/USD finishing the week pretty much unchanged.
We don’t expect this to last. With the RBA overnight interest rate policy firmly on hold, the divergence of interest rate policy trajectory between the USA and Australia will push the AUD/USD lower.
Technically, the AUD/USD closed the week below the 30-day moving average with the RSI momentum indicators pointing lower. We see the first key support level at .7580 and have a medium-term target near the January low of .7160.
Investors who want to profit from the a lower AUD/USD can look to buy the BetaShare YANK ETF. YANK is an inverse ETF with a 2.5% weighting. This means that the share price of YANK will increase by 2.5% for every 1% fall in the AUD/USD.
With the YANK currently priced around $14.20, we estimate the share price to rise to $16.40 when the AUD/USD reaches .7160.
Call in for more information about YANK and the other ASX listed ETFs
Dow Jones Index – Chart Update
The higher low formation at 20,412 remains in place.
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453