Bendigo Bank: Reverting Higher

Posted on | by Todd | Leave a Comment on Bendigo Bank: Reverting Higher

On March 16th, the ALGO engine flagged a buy sign for Bendigo Bank (BEN) at, or near, the $11.00 level.

BEN shares have reached $11.68 in early trade today.

Looking from a broader perspective, we believe the chart reflects a mean-reversion pattern, as opposed to the beginning a protracted trend higher.

On January 12th, BEN posted a high of $13.40 before reversing lower. On March 24th, BEN traded as low as $11.20 and then began to move higher.

Taking into account the high valuation of the domestic banking sector, we would expect the upside in the current move to be capped at or near  $12.30, which is the 50% reversion level of the move from $13.40 to $11.20.

Prudent money management on this trade would be to work a sell stop at last week’s low of $11.20.

Chart-Bendigo

CBA- Back to the $80.00 Handle?

Posted on | by Todd | Leave a Comment on CBA- Back to the $80.00 Handle?

Shares of Commonwealth Bank (CBA) have been trading below the 30-day moving average of $83.80 for the last four consecutive trading sessions.

As the technical picture continues to deteriorate, we have looked at some previous chart resistance levels which could now act as price support.

Between late January and early February, CBA tested the $81.10 level three times over the course of 10 trading sessions; this will be the first key support level.

However, going back to May of last year, CBA shares failed to break above $80.00 five times before extending higher in July. We feel that this is a more significant support level and a reasonable medium-term target.

Investors and subscribers will remember that we sold European-style call options on CBA in late January. By selling the $83.01 strike-price into March, we were able to collect $2.50 in option premium and still hold the shares to collect the $2.00 dividend paid in February.

Those options will expire this Thursday.

As such, we will look to reset the derivative overlay strategy in CBA on corrective price moves higher.

Chart-CBA

Our Long TCL – SYD Position Update

Posted on | by Leon Hinde | Leave a Comment on Our Long TCL – SYD Position Update

Over the past month, we’ve been long TCL and SYD , as we felt US interest rates would not push beyond levels already priced in by the market, therefore creating value in yield sensitive names.

Out of the potential basket of yield sensitive names to consider, our preference was TCL and SYD coming into their June dividends.

With the above stocks now trading up 15%+ and 10%+, (respectively), from their recent lows and the yields now compressing below 5%, we feel potential capital gains from here are limited and it’s time to sell covered calls to enhance the return.

Chart – TCL
Chart – SYD

 

 

US Update: Trump Puts Healthcare Reform On Hold

Posted on | by Todd | Leave a Comment on US Update: Trump Puts Healthcare Reform On Hold

US Stock Indexes finished the week mixed as many investors were focused on how the House of Representatives would vote on the administration’s bill to repeal major parts of the current health care program, referred to as Obamacare.

As the day progressed, the DOW and SP 500 swung between positive and negative territory as news reports gave conflicting stories about whether the bill would pass, or even be voted upon.

In the end, after Mr Trump’s ultimatum failed to yield more “yes” votes , the embattled bill seeking to start the healthcare reform process, and free up almost a trillion dollars in tax dollars, was pulled from the floor.

As a result, Mr Trump suffered a second consecutive blow from within his own Republican party. This party dissension will likely cast doubts on the President’s ability to deliver on other policy measures including; tax reform, infrastructure spending and the debt ceiling legislation.

The announcement that the vote was cancelled happened too late in the day to have any material impact on today’s trade.

However, going into next week, investors will have to address the question of how Mr Trump can now unify his own party behind his administration; and whether this legislative defeat will “deflate” the “reflation” trade, which was triggered after he was elected?

Strong Rally In Caltex

Posted on | by Todd | Leave a Comment on Strong Rally In Caltex

Despite a generally weak Crude Oil market, shares of Caltex have rallied almost $2.00 this week.

The shares were lifted off a 3-year low after the company announced a stronger-than-expected refiner margin of USD 12.71 per barrel for the month of February.

This is an increase from last year’s refiner margin of USD 12.43 per barrel and well ahead of the street’s estimates of USD 9.74 per barrel.

The increase in the margins has had a knock-on effect and lifted the calendar year EPS forecasts by 1.3% to the $2.40 range.

We now see chart resistance for Caltex at, or near, the February highs of $31.00.

BOQ: Caution In Front of Results

Posted on | by Todd | Leave a Comment on BOQ: Caution In Front of Results

After trading as high as $12.50 on January 12th, shares of BOQ have followed the same “sideways-to-lower” pattern as the rest of the Australian banking names.

With first-half 2017 results due on March 30th, this pattern could continue and even breach the February low price of $11.30.

The headwinds of negative loan growth and falling margins don’t appear to be fully priced-in at current levels.

The trading multiples of BOQ are not cheap, and with 2017 EPS growth estimated at under 3%, we believe an $11.00 price is more likely than a $12.00 price over the medium-term.