QBE Insurance posted an $844 million net profit on May 3rd, which was their best result since 2010.
By May 11th, the share price had raced to a new high for the year at $13.60.
With internal momentum indicators beginning to turn lower, we are suggesting to exit long positions or sell the $13.50 covered calls into September.
We expect to see good support in the $12.00 area as a medium term target.
QBE
As an update to our recent Chart Watch on the XJO, we highlight again the lower high structure that has now formed. We were expecting a bounce into the 5790 – 5850 level before further selling pressure. Yesterday the price action hit resistance at 5796 and today’s open looks weak against a positive lead from the US.
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The market remains optimistic about future earnings growth for Boral. The recent Headwater acquisition in the US provides Boral with added exposure to the US housing market. Domestically, Boral is well placed to benefit from the an increase in large scale infrastructure projects.
We feel some caution is warranted though, given the weaker trends emerging is both US and domestic housing construction data. The stock trades on 19x forward earnings and less than a 4% yield.
FY18 revenue is likely to be $5.8b, EBITDA $1.15b, Net Profit $490m and DPS of $0.29.
Since trading as high as $23.20 on May 2nd, shares of JHX have dropped over 14% and are now trading below $19.80.
We posted a report on the blog on May 19th pointing out that JHX reported FY17 results which were below market expectations.
Overnight, US New Home Sales fell to 569,000, well short of the consensus expectation of 610,000. As new home construction continues to slide, we sell further downside range extension for JHX.
The new key support level comes in near the February low of $18.20.
James Hardie
Shares of Lockheed Martin (LMT) reached an all-time high of $280.00 as the defence contractor agreed to a deal with Saudi Arabia worth $28 billion.
This deal alone is enough to cover the company’s revenue for over 6 months
LMT is one of the key beneficiaries of a total arms package which will be worth over $350 billion over the next 10 years.
Among other products, the deal includes the sale of 150 Black Hawk helicopters, systems for air defence, tactical aircraft and combat ships.
Lockheed Martin
On May 6th, we posted a report on the blog which suggested that both Spot Gold and shares of NCM were in oversold territory.
At that time, the prices were at $1225.00 and $20.10, respectively. Now, Gold is back over $1250 and looking firm on the internal momentum indicators. We expect the yellow metal to test April 17th high on $1290.00 in the medium-term.
In this sense, shares of NCM have lagged behind the spot gold price and have gained just over $1.00 during the same period.
We still consider NCM undervalued at current prices and suggest buying outright shares, or call options out to July, for a medium-term price target of $25.50.
Newcrest Mi
The XJO chart is showing the first lower low structure we’ve seen for some time.
The broader trend, which has been in place since February 2016 is likely in the early stages of breaking lower. Any bounce higher from last week’s selling, is likely to be limited and investors should look to protect their portfolios.
New selling will likely occur within the range of 5790 and 5850, creating a lower high formation as a strong sell side signal.
With the recent sell-off in commodity names, the Algo Engine has triggered buy signals in a number of big and small cap companies.
Our preferred resource allocation remains BHP, over other alternatives. However, it’s worth taking note of the recent buy signals in RIO, FMG, IPL and in OOO, the BetaShares Oil ETF.
We look to take profit in BHP at $25, after buying at or near $22.50.
Our Algo Engine has triggered a buy signal on the Veneck Vectors Australian Bank ETF. ASX code: MVB
MVB made a low on Friday at $27.56 and we may see buying interest pickup in the early part of next week.
Investors who take this trade should work a stop loss order below $27.50.
The ALGO engine triggered a buy signal for NAB at $30.40 on Friday.
NAB shares have dropped over 11% since posting an intra-day high of $34.00 on May 1st. Several internal momentum indicators are showing an overbought condition.
With US equity markets stabilizing after Wednesday’s sharp sell off, it’s likely that all the local banking names will get a lift when the ASX re-opens on Monday.
We see scope for a corrective bounce into the $32.50 area, and suggest looking to buy NAB shares outright, or consider buying the $32.00 call options into June.
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