TCL Firms On Lower US Yields

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On October 5th, shares of TCL  traded as low as $11.62. At that time the US 10-year bonds were yielding 2.40%.

US yields have now dropped to 2.28% and TCL’s share price is over 6% higher at $12.30.

This interest rate correlation and sensitivity is linked to several other ASX stocks including WOW, SYD and SCG.

With the odds of a FED rate hike in December still over 70%, we see limited upside in TCL beyond $12.50.

As such, we like selling the $12.50 TCL calls into March and collecting the 40 cents premium.

In addition, TCL is set to pay a 27 cent dividend in December, which will bring the total cash flow from the derivative overlay strategy to 67 cents.

   Transurban Group

 

Chinese Imports Rise In Front Of 5-Year Plenary

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Chinese import data released on Friday showed a surge of 18.7% on a year-on-year basis.

Leading the the stronger import numbers was Iron Ore.

Purchases of Iron Ore expanded to 102.8 million tons compared to 93 million tons during the same time last year. Compiling the data for the first nine months of 2017, full year purchases are on course to top 1 billion tons.

Shares of RIO and BHP have responded by rising by 2% and 2.5%, respectfully, in early trade

China will convene its five-yearly congress on Wednesday. Some reports suggest that the rise in raw material imports into the lead-up of the Communist Party meeting may not be sustainable.

Looking at the daily charts, we see near-term resistance for BHP at $27.50 and at $70.70 for RIO. 

BHP

Rio Tinto

 

CCL Regains It’s Fizz

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Since trading at a three-year high of $10.80 in late March, shares of CCL have slid almost 30% to post a nine-year low of $7.66 on October 6th.

Buyers returned last week and lifted the share price back over $8.10.

One of the likely reasons for investors’ interest was that the US Coca-Cola Company has recently increased their shareholding in CCL from 29.4% to 30.4%.

This increased stake has been part of the $350 million share buyback scheme announced by CCL earlier this year.

At this point we don’t have an ALGO buy signal on CCL, but will update as more price sensitive information comes forward.

Technically, we see the next level of price resistance in the $8.60 area.

Coca-Cola  Amatil

 

Perth Mint Gold Sales Double In September

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The Perth Mint reported sales of 46,415 ounces of Gold during the month of September. This is more than double the 23,130 ounces sold in August.

The Perth mint refines over 90% of newly-mined Gold in Australia and ships to investors world-wide.

As illustrated in the chart below, this trend in higher demand could indicate higher Spot Gold prices in coming months.

As mentioned in a previous blog post, Gold has rallied after the Chinese Golden week for the last four years.

This year, the yellow metal has traded $25.00 higher since the Chinese market has been back online and is now over $1300.00 per ounce.

At this point the local Gold mining names haven’t rallied in the same percentage terms as spot Gold. However, we consider this price lag to be temporary and to see higher share prices in the near-term.

Perth Mint Gold Coin Sales

BOQ Shares Reverse Lower

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Shares of BOQ have given back all of yesterday’s gains as CEO Jon Sutton warned of industry headwinds, regulatory uncertainty and increased scrutiny of banking fees. 

Mr Sutton also pledged to improve its complaint resolution protocol after the Financial Ombudsman Service said the bank had topped the list as Australia’s worst offender for disputes for home loan customers for the fourth consecutive year.

BOQ shares are currently down 1.75% at $12.83. Technically, we see the next area of support near the $12.25 area. 

Bank of Queensland

 

 

US Banks Fall On Lower Revenue Numbers

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Despite beating top line quarterly expectations, shares in US banking giants JP Morgan and Citigroup both fell on Wall Street as trading revenue numbers showed a sharp decline on a year-on-year basis.

Citigroup shares closed 3.4% lower after their trading revenue dropped 16% and JP Morgan shares slipped 1% lower on a 27% fall in year-over-year revenue.

We expect the other major US banks to report the same fall in trading revenue as lower volumes on the NYSE, combined with historically low price volatility, reduces overall market participation.

The next key levels of support are $67.50 for Citigroup and $91.70 for JP Morgan.

Citigroup

JP Morgan

 

Gold Trades Higher After Golden Week

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A few weeks ago, we posted a report outlining the correlation between the Chinese Golden week holiday and the price of spot Gold.

Over the last four years, the price of Gold has dropped into, and during, Golden Week and then traded higher once the Chinese markets came back online.

As the chart below illustrates, spot Gold posted a low of $1262.00 last Friday and has since lifted by over $30.00.

We continue to look for Gold to trade higher into the end of the year and re-test the the $1350.00 level.

As such, we like long positions in NCM, EVN and SAR. 

Spot Gold

 

Newcrest Mining

Evolution

Saracen

Limited Upside In Woolies

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Shares of WOW traded down to $24.40 last Tuesday; nearly reaching the key support level of $24.20 noted in our October 5th blog.

Prices have bounced since then as wholesale food reports show that deflation is returning to the fruit and vegtable market.

Last week’s report showed a -2.3% price growth, which improves the margins on WOW’s private label brands, as well, as fresh produce.

We see the next level of price resistance in the $25.60 area and consider WOW reasonable buy/write opportunity at current levels.

Woolworths

 

 

ALGO UPDATE: AMP Is Approaching Resistance

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One of Australia’s largest money managers, AMP, has caved in on the pressure from index and computerized trading and has dropped their fees, and is looking to sack most of their active equity managers. 

The bulk of the $29 billion in funds the firm now manages will be rolled into lower-cost strategies including existing quantitative funds within AMP Capital. 

Our ALGO engine triggered a buy signal for AMP at $4.80 on August 21st.

We see key chart resistance in the $5.25 area and would look to exit long positions at, or near, that level.

AMP