Link Administration has been sold off following the Federal Budget measures aimed at increasing consolidation of inactive super accounts.
Although the announcement now creates a headwind for Link from FY20, we consider the stock “oversold”.
We suggest investors can accumulate Link at or near $7.00 support.
Link
The AUD/USD posted an intra-day high of .7810 on April 19th. Since then the Aussie has dropped over 5% and reached an 11-month low of .7410 during the NY session overnight.
And while the longer-term technical outlook remains negative, the current price action suggests that we could see a modest upside correction over the next week.
During this same period of time, the price of AUD EFT with the symbol YANK has traded from $13.10 to $14.55.
We suggest investors holding YANK should take profits at or near $14.40 and look to re-enter in the $13.90 area.
Yank
Our Algo Engine triggered a recent series of short signals in IRE.
In a strong market, Iress may trade as high as $11.50, however, we feel the stock is overvalued and likely to soon resume the downtrend.
The initial downside target is currently near $10.00.
CBA provided a 3Q18 trading update and the result was soft and reflected declining bad debt charges are no longer offsetting softer revenues and higher operating expenses.
Historically, CBA traded on an average 11% premium to the other banks and we’re now seeing that narrow down to 4%.
CBA
WBC’s 1H18 NPAT of $4.25bn was a strong result and beat most analysts expectations.
Margin expansion and strong contributions from markets & treasury income, showed positive trends and helped to deliver total earnings growth of 4%; outperforming both ANZ and NAB.
We highlight the trend across all bank results where bad debt charges are lower than expected. Provisioning is at historical low levels and there is some early stage evidence of trends within 90+ BDD rising.
Investors should use any recovery from current levels in the banks to sell covered call options or to re-balance overweight holdings.
WBC
It was announced today that BOQ and SUN will be forced to send executives to face questioning from the royal commission when hearings resume later this month.
According to Kenneth Hayne, the line of questioning will focus on lending practices to small businesses over the last 10 years, many of which were tipped into default.
Our ALGO engine triggered a sell signal in SUN on November 9th at $14.20. Since then the stock has traded as low as $12.60 and is now back in the sell-zone near $14.20.
BOQ shares pushed against resistance at the $10.50 level last week and we have a medium-term downside target of $9.60.
BOQ
Suncorp
Lend Lease has filled the price gap to $18.50 and appears to have found price resistance.
Our initial downside target is the April 9th low of $17.05.
Lend lease
Last week on the blog we looked at the short signal on Orica leading into their earnings result.
1H18 earnings were announced yesterday and they disappointed, with a 37% drop on the same time last year.
NPAT of $124m where as consensus was looking for $149m.
The share price dropped over 5% and reached an intra-day low of $18.70 before recovering to $19.00.
This was a very popular “short” CFD trade on our SAXO Go trading platform; we suggest taking profits on the short ORI position near the $19.00 area.
Orica
Shares of WBC are trading over 2% higher and have reached a 7-week high of $29.70 in early trade.
WBC announced today that their net profit and cash earnings were 7% and 6% higher than the corresponding six-month period.
However, even though the cash earnings equals $1.25 per share, the bank said that they would hold its dividend at 94 cents per share, fully franked.
We see the next key resistance level at $30.40 and medium-term support near the April 27th low of $27.60.
Westpac Bank
One of the main policy points from Wednesday’s FOMC meeting was that the US Central bank will accept an overshoot in inflation even if overall GDP growth starts to slow……..more commonly known as Stagflation.
Stagflation is an economic condition which is characterized by higher inflation and lower GDP and employment growth, which is not bullish for equity markets and not bearish for Gold.
Over the last 6-months, Gold has been trading in a broad pennant formation bound by $1365 on the topside and supported at $1300 at the lower end of the range.
Due to recent USD strength, the yellow metal is currently trading near the bottom end of the range near $1315.
If US inflation rates continue to probe higher, we expect the USD/Gold correlation to soften. In an inflationary environment, Gold and the USD usually move higher simultaneously.
As illustrated in the charts below, the local gold mining stocks have been showing divergence with SBM, EVN and SAR near all-time highs, while NCM is trading at $21.55, almost $3.00 below its 52-week high.
Our base case is that Gold will rise over the medium-term, which should be supportive for the local mining names.
For more information on investment strategies within the Gold sector, call our office at 1-300-614-002.
Santa Barbara Mines
Saracens Mineral
Evolution
Newcrest Mining
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453