XJO Update: Miners Lead The Index Lower

Posted on | by Todd | Leave a Comment on XJO Update: Miners Lead The Index Lower

The ASX XJO Index fell 1.1% for the week and traded below the 6000 level for the first time this year.

Mining stocks and the major banks led the downside following weakness in commodity prices.

The ASX Gold index dropped four sessions in a row and lost 1.3% on Friday to close at 4874.60.

Iron Ore prices posted their first weekly loss in over a month, which pressured shares of mining giants BHP and RIO Tinto lower for the week.

Shares of RIO fell 4.6% to $78.00 while  BHP slipped 3.7% to end the week at $30.70

Internal momentum indicators are looking fairly neutral on the daily charts, which suggest the index could see range trading next week between 6070 and 5985.

XJO Index

 

BHP – Valuation Review

Posted on | by Leon Hinde | Leave a Comment on BHP – Valuation Review

BHP’s  medium-term cost guidance for iron-ore and coal is better than expected and will help to underpin EPS targets into FY18 and FY19.

FY18 revenue will be up slightly to $40b, EBIT $13b with reported profit in FY18 forecast to increase 10% to $6.4b.

Assuming dividends per share of $0.80,  BHP is placed on a forward yield of 4%.

We see upside in BHP’s share price to $30 and suggest selling a March $29.50 call option to enhance the yield.

 

 

BHP Weaker On Production Miss

Posted on | by Todd | Leave a Comment on BHP Weaker On Production Miss

The Q1  production numbers for BHP were on the soft side with weaker production and shipments of Iron ore  and coal offsetting slightly better output in Copper and Crude Oil.

The company has left its full year guidance unchanged for FY18, despite recent reports that they could miss those production levels by up to 10%.

We expect the recent price volatility in Iron Ore and Coal to impact shares price trajectory well into FY18.

The newly appointed Chairman, Ken MacKenzie, addressed shareholders for the first time yesterday as the share price was pressured back below $26.50.

On balance, we believe that Iron Ore prices are at the upper end of the price range and a pullback into the $25.00 range is a reasonable buy level for BHP. 

BHP

 

Chinese Imports Rise In Front Of 5-Year Plenary

Posted on | by Todd | Leave a Comment on Chinese Imports Rise In Front Of 5-Year Plenary

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

 

Chart Watch: The XJO Index

Posted on | by Todd | Leave a Comment on Chart Watch: The XJO Index

The XJO 200 Index continues to trade within a broad, sideways “Flag” pattern bound by the June 8th low of 5624 and the June 15th high of 5834.

The low price for the week at 5637 was the result of weakness in the banking names, as well as, a drop in major miners BHP and RIO; which lost 2% and 1.5% for the week, respectively.

The continuation of the “lower high” price pattern suggests a downward bias with the next key support level near the February low of 5578.

ASX XJO Index

ALGO Update: Sell Signal In QRE

Posted on | by Todd | Leave a Comment on 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

BHP Rebounds From Last Year’s Losses

Posted on | by Todd | Leave a Comment on BHP Rebounds From Last Year’s Losses

Shares of BHP are up over 1% in early trade as the mining giant announced a USD 6.73 billion full year profit and declared a final dividend of 43 cents per share, which lifts the full-year dividend to 83 cents per share.

Higher prices for both Iron ore and Coking Coal helped contribute to the improved performance over the course of the year.

The company also announced that it wants to sell off its US Shale oil assets, as they have not performed to plan.

In our blog update from July 26th, we suggested that investors could sell European-style call options at the $26.00 strike price into November.

We still see limited upside to BHP above $26.50 and repeat that suggestion to enhance portfolio returns for investors holding BHP shares.

BHP