Algo Buy Signal – AMP & SUN

We continue to take a very cautious approach to the market, especially when we look at potential negative events over the next 8 weeks. Also, realizing that we approach this juncture at peak valuations for many global equity markets.

With the above in mind, Investors could be forgiven for wanting to sit on the sideline or only hold the highest of quality names. Traders on the other hand, will continue to remain active and apply stop-losses as a way of mitigating risk.

The Algo Engine has recently flagged buy signals in AMP and SUN. Both of these are reasonable prospects for a bounce from the oversold conditions, although stop losses should be established below the recent pivot point.

ALGO Update: Buy Signal In AMP

Our ALGO engine triggered a buy signal in AMP at $5.06 going into yesterday’s ASX close.

Since posting a tepid earnings report on August 10th, AMP shares have dropped from $5.45 down to yesterday’s low of $5.05.

The ALGO picked up on the “higher low” pattern since the initial support at $5.00 held and the recent low at $4.90 was not challenged.

Taking into account the earnings report showed revenue up 25% to $7.6 billion, and the interim dividend was lifted 4% to 14.5 cents, we see scope for some capital appreciation in the AMP from these levels.

Investors should look at placing a stop-loss order just under the June 9th low of $4.90.



A Triple-Top Formation In AMP

Shares of AMP have been carving out a triple-top pattern since October of last year. Since then, the share price has topped out around the $5.30 level on January 9th, and again on April 4th.

Regular readers will recall that AMP posted a loss of $344 million back in February. This was the company’s first full year loss since 2003 and exposed ongoing concerns about their life insurance and wealth protection divisions.

We are currently holding a $5.00/4.60 put spread into June and suggest investors look at downside opportunities from AMP.

Our near-term target is $4.60, but see scope for a move back to the November low of $4.30.

ASX – Stocks to Watch

A number of stocks within the ASX top 50 appear to be setting up medium term short signals.

We’re mindful of the upward bias in equity indexes, however, much of this is driven by broad inflows into index funds and valuations are becoming stretched, even if Q1 earnings in the US hit their target.

Here is a list of the names that are worth taking a closer look at….


Chart – AMP
Chart – CPU






AMP – Earnings Outlook

AMP FY16 normalised profit $486m. AMP announced a $500m on market buyback. 

FY18 reported profit is likely to remain flat on FY17 numbers and AMP’s ability to deliver against cost out in FY17 and continued cost discipline in future periods is the key to sustaining group EPS growth.

FY18 profit is likely to remain in the range of $900m – $930m, EPS $0.35 and DPS of $0.29 placing the stock on a forward yield 5.7%.

We remain cautions on AMP until the technical picture becomes more supportive.  Support may begin building above $5.00.

Chart- AMP


AMP 3Q Update – Deterioration in Contemporary Wealth Protection.

AMP 3Q16 update produced further losses and write downs in life insurance with significant deterioration in Contemporary Wealth Protection.

Going forward, the market is likely to place a greater focus on AMP’s more  important wealth management business. AMP is trading on 13x FY17 earnings and now offers a 6% dividend yield.

FY17 net profit should be around $920m on EPS of $0.34 and DPS of $0.28

We’ve been cautious of AMP despite the bullish analyst forecasts over recent time. In last month’s strategy piece we highlighted the relative underperformance to other financial names. This was enough of a warning sign for us not to allocate funds, however, following the sell-off on Friday, we now think value exists in the range of $4.20 to $4.50.

Due to the elevated volatility, we prefer using a spread option strategy to capture the upside whilst quantifying or protecting our downside risk.

Chart – AMP

Buying Opportunities – add these to your watch list

Today’s report is a summary of what I’m watching following some of the recent price action in the market. On the 30th of August I wrote a blog post under the heading “Property Trusts” and the commentary there still remains relevant. If the Fed Reserve doesn’t raise rates in 2016, we’ll see the yield names rally 5% to 10%. With this in mind, WFD, GPT, SCG are worth keeping on your watch list. AGL, TCL, BXB, IAG, SUN and BLD have also been triggered by the algorithm engine as buying opportunities that should be tracked for an appropriate entry point.

Other names that we’re waiting for a buy signal on include JHX, SGR, QUB, RMD, TWE, SHL, CWN, AMP and NVT. Out of this group, QUB and CWN are the closest to the entry condition being triggered.