AMP Continues to Grind Higher
AMP continues to trade higher as the price action builds on the “higher high & higher low” formation.
AMP was added into the ASX50 model in June at $5.00. Our upside target for the stock is $5.40 – $5.50.
AMP
Algo Update – South 32
South 32 has rallied from the recent support level, as buying increased at $3.20.
S32 is in the ASX 50 model following the Algo Engine buy signal back in February.
We see further upside toward the $3.50 level.
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
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
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
ANZ announces $1.5b share buyback
ANZ announced a $1.5bn on-market buyback, which is expected to commence in January 2018.
Our Algo Engine triggered a buy signal in ANZ on the recent higher low price formation.
ANZ
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
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
TCL Entitlement Offer
TCL is undertaking a 3 for 37 entitlement offer at $11.40 per share to raise $1.9b of new equity. The retail offer will close on 24th January.
The TCL share price has hit an all-time high today at $12.93.
And while the internal momentum indicators on the daily charts are approaching an overbought reading, we expect prices to move higher and consider TCL a cornerstone holding in the model portfolio.
Transurban
ALGO UPDATE: Stay Short Suncorp
Our ALGO engine triggered a sell signal in SUN on November 29th at $14.25.
After trading in a sideways pattern for over two weeks, the share price has moved lower and closed Friday’s session at $14.05.
The internal momentum indicators are pointing lower and a break of the $13.85 level will likely accelerate the technical down move into the $13.20 area.
With a PE ratio of 17 and a price to earnings growth ratio of 1.69, we consider a fair value price just above $13.00.
Suncorp
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
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