Chart Watch – Brambles
We’ve been buyers of BXB on valuation grounds and have since been aggressive with setting the covered call overlay.
Stop loss required if the price breaks back below $9.00
ALGO Signal- Ansell
The Algo engine generated a sell signal for Ansell at the close of trade yesterday.
From a technical perspective, Ansell’s closing price of just under $23.00 is very close to the 50% retracement of the high of $25.65 traded on January 9th and the low price of $20.60 posted on February 20th.
While we still like the longer-term growth prospects of the company, we are seeing signs that the general market may be rotating lower over the medium term.
As such, we believe its reasonable to expect that investors will be able to buy Ansell back below the $22.00 handle.
The current price of $23.35 offers a good opportunity to sell close-to-the-money call options to enhance portfolio returns.
Gold/Newcrest Break Higher
As Wall Street stocks moved lower, gold prices continued to attract “safe haven” flows.
As mentioned in our earlier post, the yellow metal met technical resistance at the 30-day moving average price of $1230.00 last Friday.
However, with global equities correcting from recent highs, the next key resistance level will be the February 27th high of $1263.00.
Similarly, shares of Newcrest Mining have broken above the 30-day moving average and now look set to test the February 23rd high at $23.45
Virtus Health – Chart Update
The following chart shows the trading range and stop-loss target on Virtus Health.
Algo Signal – SYD & TCL
The Algo Engine flagged SYD as a short signal yesterday. At this stage, we’re thinking SYD trades sideways, (rather than lower), and consolidates heading into the June dividend.
With the stock at or near $6.50, it places SYD on a 5% yield and when complimented with a tight covered call, we’re able to generate 12% annualized cash flow. If price breakdowns below $6.25, we’ll reassess the strategy.
Utilities & REIT’s, (SYD & TCL), are benefiting from US yields retreating from recent highs.
GOLD/Newcrest Approach Resistance Levels
Both the share price of Newcrest Mining and Spot Gold rallied sharply last week.
As such, both are now trading against the key technical resistance at the 30-day moving average areas of $22.00 and $1230.00, respectfully.
Looking ahead, the question is whether the inverse correlation between global equity prices and Gold continues, and whether that will continue to lift the shares of Newcrest?
On Friday, the daily trading volume in Newcrest was 12.7 million shares.
This is more than twice the average daily turnover of 5.5 million and the largest volume day since 18.5 million shares were traded on June 24th, 2016.
Generally, an up-day in the share price, on expanding volume, is a positive sign for further gains in the share price.
At this point, we don’t have a buy signal from the ALGO engine but will watch the price action closely.
XJO – Chart Update
The XJO remains within the 5600 – 5830 consolidation range.
Banks – Fully Valued
Looking at the recent run up in ANZ, NAB & WBC, it would appear that the stocks are fully valued at these levels.
Either taking profits or selling at-the-money call options to enhance the income, (whilst staying exposed to the May dividend), is a reasonably prudent approach at this time.
Chart – ANZ
Chart – NAB
TABCORP Fined $45 Million
Tabcorp has agreed to pay the largest civil penalty in Australian corporate history yesterday, as company officials admitted that they had failed in it’s obligation to strictly follow domestic Anti-money laundering laws.
The gaming company agreed to pay $45 million to the Federal Government and pledged to modify its protocol for management oversight and operational execution of their money laundering program.
We feel the “silver lining” to this story is that the ACCC will take a favorable view of Tabcorp’s admission of oversight and commitment to increasing internal surveillance when ruling on the pending merger with Tatts group.
Shares of the company have traded back to support at $4.50 in early trade. We view Tabcorp as a $5.00 stock in the medium-term and suggest adding to long positions at these levels.
Amcor – Finding Support
Amcor looks like it is finding support at $14.25 and could trade up to $15.00.
With the stock on a 4% forward yield and earnings likely to grow at 4 – 8% p/a we think this makes a AMC a good buy-write strategy.
The August dividend plus the call option income is generating over 10% annualised cash flow, whilst still allowing 5% capital growth over the next 6 months.
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