ETF Update: Buy YANK Into The US FOMC Meeting

Posted on | by Todd | Leave a Comment on ETF Update: Buy YANK Into The US FOMC Meeting

At the FOMC meeting this Thursday, the US Federal Reserve is widely expected to raise the Fed Funds target by 25 basis points to 1.25%.

This would be the third increase in the FED’s target band since November and further underscore the fact that the FED is the only G-10 central bank which has an upward interest rate trajectory.

With the RBA maintaining overnight rates at 1.50%, the spread between US and Australian benchmark rates will narrow to a 11-year low of just 25 basis points.

This further narrowing of the carry premium between the AUD and USD will likely put more downward pressure on the AUD/USD.

Investors looking to profit from a lower AUD/USD can buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the price of YANK increases as the AUD/USD trades lower. It also has a weighting of 2.5%, which means the unit price will fluctuate  by 2.5% for every 1% change in the AUD/USD exchange rate.

With a current price of $14.70, we calculate that the price of YANK will be near $16.50 as the AUD/USD returns to the January low of .7160.

 

BetaShare ETF: YANK

Australian Banks – Key Levels to Watch

Posted on | by Leon Hinde | Leave a Comment on Australian Banks – Key Levels to Watch

Mid next week in the US the FOMC will announce their decision on US interest rates. The market is expecting a 25 basis point increase.

Buying interest in the US banking stocks has increased over the last few trading sessions, as increasing rates are perceived to help bank profit margins. CitiGroup hit a new post GFC high, whereas, Goldman Sachs and JP Morgan have only seen moderate bounces from their recent lows.

CBA will need to hold the $77.65 low.

Chart – CBA
Chart – MVB

 

Chart – CitiGroup
Chart – JP Morgan
Chart – Goldman Sachs

 

 

 

 

Big Reversal In The FANG Stocks

Posted on | by Todd | Leave a Comment on Big Reversal In The FANG Stocks

Shares of Facebook, Amazon, Netflix and Google (also known as the FANG stocks) all fell over 3% today as investors pulled money out of the overheated US Tech sector.

The FANG stocks have been market leaders all year and have accounted for over 40% of the NASDAQ gains year-to-date. On a valuation basis, these names have added over $600 billion to the S&P 500 even though they only make up 13% of the index.

Many analysts have been expecting a pullback in the tech sector as P/E ratios and forward guidance data have approached the levels last seen prior to the 2000 and 2008 market corrections.

It’s worth noting as a point of reference that Microsoft, which is not a FANG stock, fell 62% after the 2000 tech bubble burst and dropped 45.5% during the financial crisis in 2008.

Even after today’s sharp decline, the S&P tech sector is still up over 18% for the year.

Trade Update……Stay Short The XJO

Posted on | by Todd | Leave a Comment on Trade Update……Stay Short The XJO

As ASX market participants prepare for the Queens Birthday weekend, we would like to update some of the recent market themes suggested to investors and subscribers.

Our short bias on the XJO took a little longer to develop than had hoped but now looks to be on track to hit our 5500 target by mid-July. An integral part of the technical price breakdown in the XJO has been the sell off in the major banking names.

The major banking names are all 8 to 10% off their April highs. The Government’s Levy legislation, combined with slower loan growth and loss provision numbers, has the potential to see the banks trade back to the November 2016 lows.

Many clients who were reluctant to sell their bank shares are now calmed in the knowledge that they will be able to re-establish those positions at lower levels.

In addition, investors with a slightly higher risk profile were able to profit handsomely on the bought put options as the banks traded lower.

Like the XJO trade, the long put positions in JHX and AMP are now gaining momentum to the downside. Since both of these strategies were structured as “Put Spreads”, we are looking to scale out of these positions and replace them with outright downside directional strategies over the next few weeks.

 

 

 

 

 

 

ETF Watch: Buy OOO For Mean Reversion Trade In Crude Oil

Posted on | by Todd | Leave a Comment on ETF Watch: Buy OOO For Mean Reversion Trade In Crude Oil

Over the last 10 trading sessions, WTI Crude Oil has dropped over 13% from $52.00 to last nights low of $45.20.

Technically, we see good support near the $43.75 area, which was the reversal low posted on May 5th.

Fundamentally, increased political tensions between OPEC members Qatar, Saudi Arabia and Iran could escalate into military engagement with some associated levels of supply disruption in the near-term.

As such, we have been looking to buy the dip in some of the local energy names like Origin Energy and  Oil Search. (The ALGO engine gave a buy signal on OSH yesterday)

Further, we have also suggested that investors looking for a mean reversion higher in Crude oil prices can buy the BetaShare Oil ETF with the symbol OOO.

OOO traded as high as $8.10 just a week ago and has now in the low $7.00 area.

BetaShare Crude Oil ETF

 

Origin Energy

Oil Search

 

Amcor – Buy Write

Posted on | by Leon Hinde | Leave a Comment on Amcor – Buy Write

We continue to see Amcor as a solid contributor to portfolio returns, especially when complimented with a slightly out-of-the-money call option into November or December.

A combination of the dividend and call option premium produces 10 – 12% annualised cash-flow.

FY18 forecast revenue US$9.6b, EBITDA US$1.5b, Net Profit US$790m, EPS US$0.66 and DPS US$0.49 places the stock on a  forward yield of 4%.

Buy on any marginal price retracement.

Chart – AMC

 

 

 

 

A New Bullish Case For Gold

Posted on | by Todd | Leave a Comment on A New Bullish Case For Gold

Spot gold rose to its highest levels since November near $1,295 per ounce on Wednesday, good for a 13% gain so far in 2017.

In so doing, Gold broke a technical downtrend that has been in place since the  September 2011 peak of $1,900 per ounce.

The support in the yellow metal may be evidence of market fear rather than reflationary exuberance. The Chinese Gold and Silver Society Exchange expects 2017 mainland gold imports to increase by 50% from the prior year, amidst increased safe haven demand.

Daily chart analysis points to the next resistance level near the September highs of $1,322.

We continue to accumulate shares and call options on NCM. We also suggest shares in EVN and the BetaShare Gold ETF with the symbol QAU.

 

 

Bank Stocks – Where’s Support

Posted on | by Leon Hinde | Leave a Comment on Bank Stocks – Where’s Support

On the 30th of May we looked at the MVB Veneck Vectors Banking ETF and identified the 50% retracement target to be $26.00. Yesterday, the MVB traded at a low of $26.56.

The 50% retracement of the prior peak -to-trough does not guarantee price support.  However, more often than not, buyers will step back in at or near this point.

The conundrum facing local ASX investors is the dislocation between US equities and Australian equities.  As such, “buy on the dip” domestic investors will need to remain cautious of the extended US equity valuations.

Chart – MVB