OVERNIGHT News: FOMC and Crude Oil

Posted on | by Todd | Leave a Comment on OVERNIGHT News: FOMC and Crude Oil

The FOMC announcement to raise the target Fed Funds rate by 25 basis points to 1.25% was largely priced into the market.

However, the “hawkish” guidance  about further upward adjustments and the specific plans to reduce the FED’s $4.5 trillion balance sheet have raised concerns about current stock market valuations and the impact of tighter monetary conditions.

The major US indexes were mixed with the NASDAQ down .50%, THE Dow Jones 30 up .25% and the SP 500 down .10%.

US Energy stocks were all lower as Crude Oil prices slumped on a downbeat assessment from the IEA and increased production from both the US and OPEC nations.

The front month WTI Crude contract closed down over 3% to $44.65, which is the lowest closing price in over 18 months.

As a result, shares in both BHP and Oil Search have opened more than 2.5% lower.

Chart – Dow Jones

 

Iron Ore Slips Below $60.00

Posted on | by Todd | Leave a Comment on Iron Ore Slips Below $60.00

Spot prices of Iron Ore fell again overnight  dropping to a fresh seven-month low. The 62% grade was down over 2.5% to close at $57.02 per ton.

During the month of May, Iron Ore dropped over 17%, extending its decline from the multi-year high of $95.00 last traded in February.

Mining names BHP, RIO and FMG are all under pressure in early trade losing more than 1% each.

FMG has reached an eight-month low of $4.70. We see the next downside targets on Rio and BHP at $59.50 and $22.50, respectfully.

Rio Tinto

BHP

Fortescue Metals

 

Algo Buy Signal – Resource Sector

Posted on | by Leon Hinde | Leave a Comment on Algo Buy Signal – Resource Sector

With the recent sell-off in commodity names, the Algo Engine has triggered buy signals in a number of big and small cap companies.

Our preferred resource allocation remains BHP, over other alternatives. However, it’s worth taking note of the recent buy signals in RIO, FMG, IPL and in OOO, the BetaShares Oil ETF.

We look to take profit in BHP at $25, after buying at or near $22.50.

Chart – Oil

 

 

BHP Assets Are In Play

Posted on | by Todd | Leave a Comment on BHP Assets Are In Play

Shares of BHP have opened firmly above $24.00 as overnight comments from Andrew Mackenzie confirm the company is likely to spin off some assets in the near-term.

Mackenzie was addressing a major mining conference in Barcelona when he gave the strongest indications yet that BHP might be giving ground to New York hedge fund Elliott Management’s aggressive bid to break up the mining giant.

As such, we see this development as underpinning the stock, even as Crude Oil and Iron ore prices remain in the lower end of their 6-month trading ranges.

The ALGO engine triggered a buy signal for BHP on May 5th at 22.50. Over the last few days, we have suggest taking profits on long positions above $24.00 and looking to re-enter at lower levels.

BHP: Resistance In The $24.00 Area

Posted on | by Todd | Leave a Comment on BHP: Resistance In The $24.00 Area

Since posting an intra-day low at $22.50 on May 5th, shares of BHP have lifted over $1.00 to $23.85.

Against a back drop of weakening fundamentals in the Iron Ore and Coal markets, we see this corrective move higher running into resistance in the $24.00 area.

General market downside risk is also adding to our interest in placing orders to exit long positions in BHP at $24.00 going into the weekend.

BHP – Where is the 50% Retracement

Posted on | by Leon Hinde | Leave a Comment on BHP – Where is the 50% Retracement

At $21.00,  BHP will be trading at the 50% retracement level of the 2016 rally.

Often, we’d expect this level to provide buying support. The Algo Engine is now flagging the higher low structure and therefore, within the $21.00 – $22.50 range, we look to identify the short-term momentum indicators turning positive, to confirm our entry point.

Chart – BHP

 

 

BHP And RIO Trade Lower As Iron Ore Continues To Unravel

Posted on | by Todd | Leave a Comment on BHP And RIO Trade Lower As Iron Ore Continues To Unravel

The Spot Iron Ore price continued to trade lower overnight, losing 4.6% to reach a 6-month low of $63.20 per dry tonne. This is a 33.5% drop from the high of $95.00 last traded on February 21st.

It’s worth noting that the sharp selloff is picking up pace just weeks away from the delivery of the Australian Federal Budget.

Since Iron Ore remains the country’s single biggest export, Federal revenue projections are highly sensitive to the outlook for Iron Ore prices.

Both RIO and BHP have traded lower on the open,  reaching new 5-month lows of $57.60 and $23.30, respectively.

Unless Iron Ore stages a dramatic rebound, we look for the the next key support level in RIO at $56.20, and at $22.60 for BHP. 


 

BHP Gets A Boost

Posted on | by Todd | Leave a Comment on BHP Gets A Boost

Yesterday’s 5% rally in BHP left a many investors wondering what was driving the shares on a quiet Monday session.

The main reason was a  report that Elliott Advisors suggested the company could unlock shareholder value by spinning off US Petroleum and collapse of the LTD and PLC shareholdings.

The idea is that the Elliott plan would accelerate the release of value and franking credits. Of course, the $6.00 rally in Crude Oil since March 27th has also been a boost to BHP shares.

Our ALGO engine generated a buy signal  for BHP on March 13th at $23.65.

We remain cautious of the extended valuation of equities, in general, and suggest placing a stop in the $24.40 level on long positions.

Chart BHP

Iron Ore Gets Hammered

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With the financial media focused primarily on the US missile strike in Syria, many investors didn’t notice the 7% drop in Iron Ore prices on Friday.

The spot price of Iron Ore fell $5.50 to $75.45 yesterday. This is over 20% lower than the February 21st closing price of $95.00.

Making matters worse, the September contract for Iron Ore on the Dalian exchange also closed 7% lower after trading down to its 8% limit for most of the session.

The sharp fall in Iron Ore will have its biggest impact on BHP, RIO and the Aussie Dollar.

The AUD/USD closed the New York session at a 1-month low of .7495. This is the first close below .7500 since early January and opens up the next support level at .7425.

Investors who would like to profit from a lower AUD/USD can look at the BetaShare YANK Exchange traded Fund. This is an inverse fun which gains value as the AUD/USD falls.

Call in for more details about YANK and the other ETFs that we cover.

Chart – YANK