Our Algo Engine generated a buy signal in BHP following the recent “higher low” chart formation.
We see value in the $30 – $31 range and suggest accumulating BHP with a view towards selling covered call options to enhance the overall investment return.–
BHP
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Our ALGO engine triggered a buy signal in Sandfire Resources last week at $6.75.
The “higher low” pattern is referenced to the intra-day low of $6.42 posted on December 15th last year.
SFR operates the DeGrussa Copper/Gold mine in WA and reported a 50% jump in net profit to $123 million for FY 2018.
As a low-cost producer, SFR traded as high as $10.00 in mid-June, but has slipped along with the price of Copper over the last two months.
With an announced 38 cent per year dividend, the current price of $6.70 reflects a forward yield of just under 5.7%.
As the technical picture improves for both Copper and Gold, we see an initial upside target of $8.80 for SFR over the medium-term.
Sandfire Resources
We currently hold Crown Resorts in our ASX top 100 model portfolio, following a Algo Engine buy signal back in February at $12.50.
The stock has recently retraced from the $14.59 high made on the 10th August.
We now feel the sub-$13.50 level provides an opportunity to accumulate Crown shares at a fair valuation.
NOTE: Star Entertainment is also back in the buy zone between $5.13 – $5.30
Crown
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We recommend accumulating Origin Energy shares at $7.70.
Origin
Shares of TWE have been trading actively since the release of their full-year results on August 15th.
It seems investors are weighing up the negative impact of increased trade tensions between the US and China against the positive bottom line news over the last year.
TWE posted a NPAT of $360 million for FY 2018, which was an increase of 33% on the prior year.
The strongest component of the report was in Asia, which reflected a 23% rise in volume and a 12% increase in net sales.
As such, the biggest risk for TWE is a material slow down in demand from their Asian customers.
On balance, we see scope for a pull back into the the $17.20 area and a medium-term upside target of $20.00
Treasury Wine Estates.
Our Algo Engine generated a buy signal in the ASX resource ETF with the symbol OZR at $10.30.
This “higher low” pattern is referenced to the $9.85 low posted on April 10th.
The OZR units have a 53% weighting to a diversified portfolio of ASX listed metals and mining stocks.
Our initial target is in the $11.00 area.
OZR
Our Algo Engine generated a buy signal in BHP and we highlight in the chart below our preferred accumulation price range.
Escalating trade tariffs and concerns regarding a China slowdown are the obvious reasons for short-term price weakness in BHP’s share price.
We expect to see some sort of resolution in the trade disputes by the New Year, although pressure will likely remain ahead of the US mid-term elections in November.
BHP
It’s a long held belief among investors that rising interest rates are good for Australian banks in terms of enhancing their earnings.
But this is not necessarily true in the current financial environment.
Banks make money on widening interest rate and credit spreads; simply, the difference between their cost of money and the return on the loans they make to their customers.
For example, last week the ANZ and CBA increased their variable rate mortgages by 16 and 15 basis points, respectfully.
The banks have cited the sustained rise in wholesale funding costs as the reason for lifting rates even though the RBA has kept official lending rates unchanged.
On a valuation basis, we’re cautious of how the repricing of variable rate mortgages will offset the headwinds of higher funding and materially add to earnings growth or an expansion of loan creation.
Further, it’s likely that the local banks will face increased regulatory expenses from the royal commission, including tighter underwriting standards and disclosures of fees.
On balance, we see scope for the share prices of the domestic banks to test the lows posted in June before sustaining any protracted rally higher.
CBA
ANZ
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