AZJ – Stay on the Short Side
We continue to believe AZJ will come under selling pressure as the company moves to lower the future dividend payout ratio.
Medibank – FY17 Earnings
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%.
Algo Update – TCL, SYD & AMC
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.
Algo Buy Signal – Suncorp
Our Algo Engine flagged a buy signal in Suncorp following the recent sell-off, which has resulted in a 15% price correction.
At $13.00, Suncorp is now forming a “higher low” formation and a technical bounce is likely to occur.
We recommend a stop loss below the $12.58 low.
SUN
Chart Update – XJO
The S&P/ASX 200 Index finished the week down 0.06%.
The best performer was the Energy sector, up 3.8%, and the worst performer was the Property Trusts sector, down 2.4%.
The XJO remains in a “lower high” pattern, following the sell-off from the recent 5836 level.
NYSE Internal Indicators Weaken Further
As the major US stock indexes gyrate on fundamental economic reports and political developments relating to tax reform and debt ceiling legislation, many technical indicators are reflecting the deterioration of upside price momentum.
The chart below illustrates that the percentage of NYSE stocks trading above their 200-day moving average has decreased at a brisk pace over the last month.
When this indicator moves below 50%, it is saying that fewer stocks are supporting the overall index price level.
Historically, this has resulted in at least a 5% correction in the SP 500 over the near-term.
On that basis, the 4-week target for the SP 500 would be in the low 2300.00 area.
NYSE Breadth
ALGO Update: Sell Signal In QRE
Our ALGO engine triggered a sell signal in the BetaShares Resource ETF with the symbol QRE at $4.85.
QRE is comprised of 10 ASX stocks which include BHP, Bluescope Steel and Caltex. The weighting is such that BHP, RIO and WPL make up over 50% of the ETF pricing.
Frequent blog readers will remember that we had a generally bullish outlook on the resource sector back in mid-March, and advised clients to buy QRE in the $4.50 area and BHP in the $22.50/70 price range.
We now agree with the ALGO engine that the resource names look fully valued overall.
We suggest that investors who are holding BHP can either take profits in the $26.25/50 area, or write covered calls at $26.50 into November to enhance portfolio returns.
BetaShare ASX Resource ETF: QRE
BHP
Scentre Group 1H17 Earnings
Scentre Group reported 1H17 profit growth of 3.5% compared to the same time last year.
We have the stock trading on a 5.5% yield, based on FY18 distribution of 22 cents per share.
Algo Alert – AGL Approaching an Oversold Level
When AGL was trading at $27 back in April, we were warning that the stock was overvalued and suggested that fair value was back at $22.
AGL is now trading $23 and members should be watching for a buy range to develop.
AGL
Short Banks and Retailers
We like the short side of the banks and retailers coming into what will likely be a volatile period for equity markets in September & October.
The regional banks, BOQ & BEN look expensive.
Following their profit announcement on the 31st August, HVN should be on your wishlist as a potential short, with a stop losses above recent highs.
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