Negative Divergence In The XJO Index

Posted on | by Todd | Leave a Comment on Negative Divergence In The XJO Index

The last time our ALGO engine gave a signal in the XJO Index was on September 8th, 2016; this was a buy signal at 5227.

It isn’t surprising that there hasn’t been a more current signal considering that the index has traded in a wide, sideways trading range between 5650 and 5960 during 2017.

However, the recent break above 5960 has the technical structure of a “price exhaustion pattern” and could signal a correction lower into the new year.

Looking at the internal momentum indicators on the daily chart, the November high of 6052 had a corresponding RSI reading of 80.00.

Interestingly, the higher print from December 20th at 6083, had a lower RSI reading of 63.00.

This divergence in momentum suggests the index is nearing a medium-term high and could offer a shorting opportunity. The next key support level is the November 16th low at 5916.

The XJO Index is available to trade on our SAXO Go platform as both a CFD and a futures contract.

XJO Index

 

AUD Boosted By Last Week’s M&A Activity

Posted on | by Todd | Leave a Comment on AUD Boosted By Last Week’s M&A Activity

Last week’s Merger and Acquisition activity was a key driver in the Aussie dollar’s move from .7510 to .7690.

Tuesday’s Westfield deal for AUD 32 billion combined with Zurich’s announcement that it will buy ANZ’s life insurance business for AUD 2.85 gave the local currency a bid tone for the week.

All together, the flow was about $9 billion of AUD/USD that needed to be bought to cover the hedging aspect of the M&A transactions. This was enough to push the AUD/USD to .7690 before offers capped the move.

With this buying support absorbed into the market, the technical picture in the AUD/USD looks to be weakening with the longer-term down trend the path of least resistance.

We see the next area of support in the .7565 area. A break of the December 11th low at .7510 could trigger a quick move back to the .7300 handle.

Some of the ASX stocks that would benefit from a lower AUD include: RHC, NCM, QAN and TWE.

Ramsay Health

Newcrest Mining

QANTAS

Treasury Wine Estates

 

US Tax Reform To Lift TWE

Posted on | by Todd | Leave a Comment on US Tax Reform To Lift TWE

With about 42% of its revenue and EBIT from the USA, TWE’s bottom line will get a boost from the pending reforms to the US tax code.

On the top line, TWE should be able to deduct interest payments on their USD dominated debt, which combined with accelerated depreciation, could boost NPAT by about 8%.

From a technical perspective, we see scope for a move higher on a break of the $16.30 resistance level. As such, we would look to take profits on long positions at or near the $16.50 area.

Treasury Wine Estates

 

ALGO Buy Signal For Inghams Group

Posted on | by Todd | Leave a Comment on ALGO Buy Signal For Inghams Group

Our ALGO engine triggered a buy signal for Inghams Group at $3.42 into yesterday’s ASX close.

From a fundamental perspective, ING’s most recent 12-month earnings report showed the company made $59.1 million, which was 85% higher than the previous 12-month period.

The stock has traded as high as $3.90 on October 9th, and we expect to see good buying support in the $3.25 area for a move higher into Q1 2018.

Inghams Group

 

ALGO Update: Stay Long Sydney Airport

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Long Sydney Airport

Our ALGO engine triggered a buy signal in SYD on August 2nd at $6.85. Since then it’s traded as high as $7.60 and is currently in the $7.30 area.

We hold this stock in the model portfolio and feel the fundamentals of the business continue to point to higher prices.

Recent reports show that more than 43 million travellers will fly into Sydney this year. That’s almost double the 23 million per year when it was privatised in 2002.

We have a $8.25 price target on SYD and will look to write cover calls in that area to enhance portfolio returns.

Sydney Airport

 

Algo Update – Short AZJ

Posted on | by Leon Hinde | Leave a Comment on Algo Update – Short AZJ

Our Algo Engine flagged the recent “lower high” structure in AZJ, and we’ve been highlighting the trade on the blog as one of our preferred shorts.

The stock is $0.40 lower today from last weeks $5.40 high.

Our concern with AZJ, relates to the unsustainable payout ratio.

The downside momentum looks to be increasing for a move to the early October lows near $4.75.

AZJ