ALGO Update: Buy QANTAS On A Pullback

Posted on | by Todd | Leave a Comment on ALGO Update: Buy QANTAS On A Pullback

Shares of QAN have had a good start to 2018.

After slipping as low as $4.77 on January 10th, the share price has rallied over 10% and closed the week just off  its 1-month high near $5.25.

This move is made even more impressive against a backdrop of rising fuel costs and a stronger Aussie Dollar.

And while the internal momentum indictors aren’t reflecting an overbought condition, we believe that the share price is susceptible to pullback into the $5.00 support area in the near-term.

We added QAN to our ASX Top 50 Model Portfolio in July of 2017 at $5.25 and our ALGO engine triggered a buy signal in the stock on December 8th at the same price.

QANTAS

 

 

 

 

 

Crude Oil Rally Pauses on Trump’s USD Comments

Posted on | by Todd | Leave a Comment on Crude Oil Rally Pauses on Trump’s USD Comments

Since posting an intra-day low of $55.80 on December 6th, the price of West Texas Intermediate (WTI) crude oil has rallied almost 20% to hit a 3-year high of $66.60 in NY trade last night.

The sharp rise in WTI has had 2 primary tailwinds: a seasonal drawdown of crude oil in storage and a 4% drop in the USD Index.

However, this week’s events could diminish, or possibly reverse, those 2 market impulses.

According to the American Petroleum Institute (API), the amount of WTI in storage has dropped for 11 consecutive weeks. This week’s drawdown was 1.1 million barrels compared to an expected reduction of 2.3 million barrels.

In addition, the recent rise in WTI has seen the US rig count rise from 789 in early December to 939 this week. More production from rigs online will likely break the string of weekly drawdowns in the near-term.

With respect to the USD, Mr Trump told CNBC yesterday that the Greenback will strengthen over time and that recent remarks made by Treasury Secretary Steve Mnuchin about a weakening USD were misunderstood.

Our ALGO engine currently has a sell signal in OSH from the $7.60 area. A material correction in the WTI price could see the stock trade back to November support level near $7.00.

Oil Search

 

New Highs In MediBank Private

Posted on | by Todd | Leave a Comment on New Highs In MediBank Private

Shares of Medibank  Private have reached a new all-time high of $3.38 as the Federal Government approved a 3.95% increase in fees for calendar year 2018.

The news was a shot-in-arm for the private insurance provider whose shares have gained over 6.5% in the last 7 trading sessions.

Since our last ALGO buy signal in May at $2.73, the stock has picked up almost 24%. MPL shares are currently trading at 21X earnings on a 3.6% yield

Internal momentum indicators have now reached overbought territory and we suggest exiting long positions at, or near, the $3.30 level.

We will look for a pullback in MPL to reenter long positions and update accordingly.

MediBank Private

 

 

 

 

 

USD Sinks On Mnuchin Comments

Posted on | by Todd | Leave a Comment on USD Sinks On Mnuchin Comments

Over the last 4 years, the ability of G-10 Central bankers to drive financial markets has risen to historic levels.

A perfect illustration of this dynamic was yestrday’s sharp sell-off in the USD after comments from US Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos.

The USD Index fell over 1% and posted a 3-year low after Mr Mnuchin said:

“A weaker dollar is good for us as it relates to trade and opportunities. Longer term, the strength of the dollar is a reflection of the strength of the US economy and that it is, and will continue to be, the primary reserve currency.”

It’s important to note that while the Yen, Sterling and EURO were all stronger against the USD, their domestic stock markets were all down over 1% on the day.

A policy meeting for the ECB is scheduled for later today. The EUR/USD has risen over 5% since the last ECB meeting in December.

It’s reasonable to expect ECB chief Mario Draghi to talk the EURO lower, which could mark a significant inflection point for the USD versus the other G-10 currencies, including the AUD.

The AUD/USD has gained more than 7% since mid-December. And while the RBA has not openly commented about the value of the AUD recently, they have been clear in their policy statements that a rising AUD is a “headwind” to domestic growth.

Investors who want to profit from  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 $12.20, we estimate the share price to rise to $16.40 when the AUD/USD reaches .7150.

Call in for more information about YANK and the other ASX listed ETFs.

BetaShare ETF: Yank

 

 

 

 

 

 

Energy Names – Best Buy-Side Opportunities

Posted on | by Leon Hinde | Leave a Comment on Energy Names – Best Buy-Side Opportunities

Within the ASX 50,  OSH, STO, WPL, ORG & BHP are the names investors consider when looking for exposure to Oil and LNG.

Currently WPL, ORG and BHP remain in our ASX50 model following a series of structural “higher low” formations.

OSH is not currently in our model portfolio.

The negative we see in the stock relates to market concerns surrounding their stretched balance sheet.

Oil Search has committed to substantial projects in PNG and Alaska and should oil prices fail to hold $60 – $80 per barrel, Oil Search may need to raise capital.

This week, Oil Search reported solid 4Q17 production at the upper end of their guidance range, with revenue of US$389mn.

Our preference remains adding long exposure on any pullback in BHP, WPL & ORG.

We are also watching for the next Algo Engine buy signal in the oil ETF OOO.AXW.

 

 

ALGO Buy Signal: Cimic Group

Posted on | by Todd | Leave a Comment on ALGO Buy Signal: Cimic Group

Our ALGO engine triggered a buy signal for CIM at $48.20 into yesterday’s ASX close.

Shares of the infrastructure contractor have dropped over 8.5% since posting an all-time high of $52.70 on December 19th.

With several large developments planned for domestic capitol cities, we see good fundamental support down into the $47.50 area.

Technically, the internal momentum indicators show the most over-sold condition in the last 18 months.

In addition, we point out that the limited share registry in CIM adds value at extreme price levels.

We see initial price resistance at the January 18th high of $49.70.

Cimic Group

QBE Rebounds After Yesterday’s Warning

Posted on | by Todd | Leave a Comment on QBE Rebounds After Yesterday’s Warning

Despite warning investors about a potential US 1.2 billion full year after tax loss, shares of QBE are over 4% higher at $10.90.

After dropping over 6% to $9.85 yesterday, it seems investors looked past the headlines and saw value in the company going forward.

Much of this optimism was based on the one-off charge of US 230 million on the value of deferred tax credits in the USA and a US 700 million impairment charge.

Our ALGO engine triggered a sell signal in QBE  at $11.00 on October 24th.

With the daily chart still dominated by the “lower high” pattern from mid-August, we consider QBE a reasonable stock for a BUY/WRITE strategy.

QBE Insurance