Following a number of analysts upgrading the outlook for Graincorp, the stock rallied over 5% in yesterday’s session.
We’ve been tracking this name, waiting for a reversal with increased volume and conviction. With the stock closing yesterday at $8.64, we now consider the $8.16 low as new support and look for a base to build at or near $8.50, with upside potential to $9.00.
The ALGO engine triggered a sell signal for BOQ on July 25th at $12.00, and for BEN on August 18th at $12.49.
Over the last two weeks, shares of these two regional banks have sold off less than the shares of the 5 larger domestic banking names.
Over the near-term, we see that divergence fading and expect the downside momentum in BEN and BOQ to pick up pace going into September.
We have adjusted our target prices to $11.15 in BEN and $12.05 for BOQ.
Bank Of Queensland
Bendigo Bank
During yesterday’s Asian session and into the London time frame, investors were anxious about North Korea’s provocative missile launch, the flooding disaster in Texas, and the looming US debt ceiling debate.
However, once the US session opened, investor’s attenton turned to preparing for the Labor Day long weekend, which marks the end of the Northern Summer.
The NYSE will close early on Friday and will remain closed all day next Monday.
Volume on the Dow Jones 30 was barely 220 million, down 25% from the 3 month rolling average of 310 million per day.
As the chart below illustrates, the SP 500 remains below the 30-day moving average with a downward bias.
S&P 500 Index
CTX’s 1H17 group NPAT was A$307 million vs guidance of A$290-310 million.
EBIT of A$470 million was also inline with company guidance of $450- 480 million.
FY18 EBIT will remain flat as the company works to reduce costs to off-set losses from the lost WOW supply agreement.
We have Caltex trading on a forward yield of 3.8%.
Earlier this morning, North Korea launched a ballistic missile that flew over the Northern part of Japan and landed in the Pacific near Hokkaido.
The missile was fired from the Sunan region around 7:30 am, Sydney time, and flew approximately 2,700 km at an altitude of about 550 km.
Both South Korea and Japan responded with a strong statement denouncing Pyongyang’s sharp escalation of tensions in the region.
Gold was already $12.00 higher after the US session and added another $8.00 after the news broke this morning. As illustrated on the chart below, spot Gold broke above a 7-year downtrend line and reached a high of $1324.50.
In an environment of global economic uncertainty and heighten geo-political tensions, we still prefer the long side of Gold and see the next resistance level at $1340.00
We still see scope for more upside in the local Gold names. Both Newcrest and Evolution are trading over 2.5% higher in early trade. We consider an upside target of $23.60 in NCM and $2.95 in EVN as reasonable price targets.
Spot Gold
Newcrest Mining
Evolution Mining
Our Algo Engine triggered a sell signal in Goldman Sachs on the 8th July 2017 at $253.00
Goldman Sachs is now trading 10% lower and the technical structure looks like there is further downside pressure to the $200 price level.
Goldman Sachs
Shares of CBA have posted a new low for the year at $76.55 as APRA announced that they will be setting up an inquiry after a series of problems prompted concerns about the bank’s culture, leadership and accountability.
This is not a good addition to CBA’s current AML allegations from AUSTRAC and a class action suit filed on the behalf of shareholders.
On balance, we don’t see any obvious catalyst to drive any of the domestic banking names higher and CBA now has the weakest technical structure.
The next key price support for CBA will be found near the October 2016 area near $75.00.
Commonwealth Bank
We continue to believe AZJ will come under selling pressure as the company moves to lower the future dividend payout ratio.
Medibank’s FY17 group NPAT of A$450 million was slightly ahead of consensus, largely on higher investment income with a 2H16 dividend of $0.0675 cents per share.
Based on FY18 EPS growth of 1 – 3%, we have MPL on a forward yield of 4.4%.
Following recent Algo Engine buy signals, we’ve seen solid price performance in TCL, SYD & AMC.
At the time of the algo buy signal, we highlighted these stocks to members as preferred buying opportunities.
However, we now see the stocks as near full value. Yields have compressed relative to 12 month EPS growth and investors should look to take profit, or sell at the money covered call options.
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