With resources looking fully valued and the banks unlikely to stage any meaningful recovery, we feel the XJO index is now approaching resistance.
6000 points is an area where we’ll be watching for selling pressure to increase.
ASX XJO Index
Over the last three weeks, the $33 billion takeover offer of WFD by French commercial property company Unibail-Rodamco has moved a few steps closer to completion.
Following the approval from French regulators, the Australian Foreign Investment Review Board also gave the transaction the green light to proceed; shareholders will vote at the AGM on May 24th.
As illustrated in the charts below, since part of the $10.00 per share offer includes Unibail script, the price of WFD has been following price of Unibail shares higher.
WFD was added to our ASX Top 20 Model Portfolio on February 7th at $8.90 and our ALGO engine triggered a buy signal on the same day.
Technically, the December high of $9.77 is the next key level of resistance. We suggest shareholders look to add to long positions into the AGM and take profits or use a covered call strategy in the $9.70 price range.
This has been a very popular trade on our SAXO Go CFD platform. For more information on WFD or CFD trading opportunities, call our office at 1-300-614-002.
Unibail-Rodamco
Westfield Corp LTD
Our ALGO engine triggered a sell signal in WPL into the ASX close yesterday at $32.20.
This corresponds to the ALGO buy signal triggered on February 20th at $29.10. Investors who followed this trade would have gained over 10% on the trade.
As noted in previous postings, the WPL share price is closely correlated to the price of WTI crude oil, which has been trading near 4-year highs over $68.00 per barrel.
Recent increases in crude oil supplies have been offset by political tensions in the Middle East, which have kept oil prices buoyant.
We believe that WPL shares are overbought and susceptible to trading lower along with spot crude oil prices. As such, we suggest exiting long WPL positions near the $32.35 level.
Woodside Petroleum
Following the Algo buy signal, S32 was added to the ASX50 model portfolio in February 2017 at $2.50.
The stock price rallied to $4.00 this year, then sold-off and created a “lower high” formation; an Algo sell signal was generated last week.
We continue our technological research in algorithm trading and remain encouraged by historical testing results.
We’re increasingly applying the rule -based model into our broader portfolio management style.
S32
Our Algo Engine triggered a recent buy signal in AGL and, with the stock price finding support at $20.50, we recommend investors add long exposure.
Our upside price target is $23.00.
AGL goes ex-div $0.54 on the 23rd August.
AGL
Shares of NCM have reached a six-week high of $20.92 even though the mining giant has cut its full year gold output forecast.
The lower production guidance is mainly on the back of a tailing dam collapse which halted operations at its Cadia mine in NSW. Cadia is NCM’s biggest and lowest-cost mine.
NCM produced 575,791 ounces of gold in the three months to March 31, down 6% from the previous quarter.
The miner now expects full year gold output to be between 2.25 and 2.35 million ounces, down from its previous estimate of between 2.4 and 2.7 million ounces.
We believe that NCM has more upside potential as the price of Gold remains stable above $1300.00 and the AUD/USD has just dropped 3% over the last 10 days.
Technically, the next resistance area is near the chart gap at $21.15. Above that level will point to the March high of $22.30.
NCM is part of our ASX Top 50 Model Portfolio.
Our Algo Engine triggered a recent buy signal in Crown Resorts and, with the stock price finding support at $12.50, we recommend investors add long exposure.
Our upside price target is $14.00.
Crown goes ex-div $0.30 on the 21st September.
Buy Crown Resorts
Our Algo Engine triggered a buy signal in CIMIC Group and with the stock price finding support at $44, we recommend investors add long exposure. Our upside price target is $48 – $50.
Over the past three weeks, the price of WTI Crude Oil has rallied over 12% and posted a four-year high at $69.35 in early NY trade last night.
However, WTI closed the session down 1.4% at $67.70 after the US and France announced they were close to reaching a deal to renew the Iran nuclear agreement, and a surprise increase of a million barrels in weekly API inventory data.
It’s worth noting that speculators have amassed a very large net long position in the WTI futures market. As of the April 17th report, the non-commercial net long position stood at 728,000 contracts.
This long exposure is just below the record high of 739,000 contracts set in early February when WTI peaked at $66.30.
Technically, the daily internal momentum indicators for WTI are stretched but not yet overbought.
The deadline for renewing the Iran agreement is May 12th. It’s likely that the ongoing negotiations of that agreement will have a strong influence on the near-term price action of WTI.
From a “cause and effect” perspective, any political hurdles in extending the Iran agreement will see WTI trade higher, while the perception of a successful agreement will likely push WTI lower.
Local shares OSH, STO and WPL have all rallied sharply over the last three weeks and have a strong correlation to crude oil prices.
As such, we urge investors to be cautious of increased volatility in the crude oil market and how it could impact these local oil names.
WTI Crude Oil
Oil Search
Woodside Petroleum
Santos
Local banking stocks have found a slight bid in early trade today. However, we expect more downside price pressure as the Bank Royal Commission proceeds.
So far, we’ve seen evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including bribes, forged documents and repeated conflict of interest in insurance products.
It seems that the banks discovered long ago it was highly profitable to sell their customers financial advice and financial products.
If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.
This model was called ‘vertical integration”, which is inherently a conflict of interest.
With earning season approaching, we believe there will be some buying interest from longer-term investors.
We will keep a close watch on banking shares and advise which names have met our ALGO price criteria to hold in investor portfolios.
CBA
Westpac
NAB
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