ALGO Sell Signal For Woodside Petroleum

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Our ALGO engine triggered a sell signal in WPL into the ASX close yesterday at $32.20.

This corresponds to the ALGO buy signal triggered on February 20th at $29.10. Investors who followed this trade would have gained over 10% on the trade.

As noted in previous postings, the WPL share price is closely correlated to the price of WTI crude oil, which has been trading near 4-year highs over $68.00 per barrel.

Recent increases in crude oil supplies have been offset by political tensions in the Middle East, which have kept oil prices buoyant.

We believe that WPL shares are overbought and susceptible to trading lower along with spot crude oil prices. As such, we suggest exiting long WPL positions near the $32.35 level.

Woodside Petroleum

NCM Remains Firm After Lower Production Guidance

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Shares of NCM have reached a six-week high of $20.92 even though the mining giant has cut its full year gold output forecast.

The lower production guidance is mainly on the back of a tailing dam collapse which halted operations at its Cadia mine in NSW. Cadia is NCM’s biggest and lowest-cost mine.

NCM produced 575,791 ounces of gold in the three months to March 31, down 6%  from the previous quarter.

The miner now expects full year gold output to be between 2.25 and 2.35 million ounces, down from its previous estimate of between 2.4 and 2.7 million ounces.

We believe that NCM has more upside potential as the price of Gold remains stable above $1300.00 and the AUD/USD has just dropped 3% over the last 10 days.

Technically, the next resistance area is near the chart gap at $21.15. Above that level will point to the March high of $22.30.

NCM is part of our ASX Top 50 Model Portfolio.

 

 

 

 

 

 

WTI Crude Oil Retreats From 4-Year High

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Over the past three weeks, the price of WTI Crude Oil has rallied over 12% and posted a four-year high at $69.35 in early NY trade last night.

However, WTI closed the session down 1.4% at $67.70 after the US and France announced they were close to reaching a deal to renew the Iran nuclear agreement, and a surprise increase of a million barrels in weekly API inventory data.

It’s worth noting that speculators have amassed a very large net long position in the WTI futures market. As of the April 17th report, the non-commercial net long position stood at 728,000 contracts.

This long exposure is just below the record high of 739,000 contracts set in early February when WTI peaked at $66.30.

Technically, the daily internal momentum indicators for WTI are stretched but not yet overbought.

The deadline for renewing the Iran agreement is May 12th. It’s likely that the  ongoing negotiations of that agreement will have a strong influence on the near-term price action of WTI.

From a “cause and effect” perspective, any political hurdles in extending the Iran agreement will see WTI trade higher, while the perception of a successful agreement will likely push WTI lower.

Local shares OSH, STO and WPL have all rallied sharply over the last three weeks and have a strong correlation to crude oil prices.

As such, we urge investors to be cautious of increased volatility in the crude oil market and how it could impact these local oil names.

WTI Crude Oil

Oil Search

Woodside Petroleum

Santos

 

 

 

 

 

Bank Royal Commission Update

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Local banking stocks have found a slight bid in early trade today. However, we expect more downside price pressure as the Bank Royal Commission proceeds.

So far, we’ve seen evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including bribes, forged documents and repeated conflict of interest in insurance products.

It seems that the banks discovered long ago it was highly profitable to sell their customers financial advice and financial products.

If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.

This model was called ‘vertical integration”, which is inherently a conflict of interest.

With earning season approaching, we believe there will be some buying interest from longer-term investors.

We will keep a close watch on banking shares and advise which names have met our ALGO price criteria to hold in investor portfolios.

CBA

 ANZ

Westpac

NAB

Telstra Still Leads The Telco Pack

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Shares of TLS have been in a basing pattern above the $3.00 level and there are solid fundamental reasons for accumulating shares in this current range.

Since the share price has slipped over 17% over the last 12 months, the current yield is now close to 10%, including the franking credits.

Mobile is the company’s biggest earner and its most important revenue stream. TLS added 235,00 net new retail customers in  H1 compared to 200,000 a year ago and only 18,000 in the June half of 2017.

A recent analyst research letter forecasts the continued dominance in the Telco space, as well as diversification into other data streams will lift the share price into the $4.60 area over the medium-term.

As such, we continue to favor the long side of TLS for value investors looking for growth and a solid dividend.

Telstra

 

 

 

Shares Of SGR Continue To Firm

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Shares of SGR continue to show an upward bias after finding solid buying support near the $5.00 area last week.

A research piece from a local analyst noted that the strategic agreement with two HK-based joint venture partners, signed in March,  would boost the share price back into the $6.10 to $6.25 range over the medium-term.

Our ALGO engine triggered a buy signal in SGR on April 12th at $5.11.

The technical picture improved last week with several internal momentum indicators now pointing higher.

Star Entertainment Group

 

 

 

Quarterly Reports In Focus This Week

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There are two Quarterly production reports and an AGM this week which could offer trading opportunities for investors.

 OZL will hold its AGM on Tuesday,  and FMG and NCM will release their production reports on Tuesday and Thursday, respectfully.

Our ALGO engine is showing a buy signal for all three of these mining names and they are also part of our ASX Top 100 Model Portfolio.

The recent stability in Copper and Iron Ore has supported the shares prices of OZL and FMG, while the “range trading” in Gold has kept NCM active within the $19.60 to $20.30 price band.

For more information about investment opportunities in these names, call our office at 1-300-614-002.

Newcrest Mining

Fortescue Metals Group

Oz Minerals

ALGO Update: A “Buy/Write” Strategy For MPL

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Since trading as high as $3.25 a month ago, the share price of MPL has dropped over 13% to hit an 8-month low of $2.79 this week.

There have been several market reports citing increased political pressure for lower premiums and lower profits for domestic health care providers.

MPL reported a first-half net profit of $245.6 million in February, up 5.9% from the previous corresponding period with an interim fully-franked dividend of 5.5 cents per share, 4.8% higher than the previous corresponding period.

Our ALGO engine triggered a buy signal on MPL at $2.81 on April 13th.

We suggest buying MPL at current levels as a “buy/write” strategy.  More specifically, looking to sell $3.00 Call options into December for 10 to 12 cents.

This will allow for some capital appreciation and investors will collect the 6.75 cent dividend on September 6th.

Medi-Bank Private

 

 

RIO Gets A Lift From Pilbara Exports

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Shares of RIO are up over 1.5%, and have reached a two-month high at $79.40 as the mining giant announced solid growth in shipments across their mineral lines.

The company announced that shipments of Iron Ore from their Pilbara mines rose by 5% along with increased shipments of copper and bauxite.

Our ALGO engine triggered a buy signal in RIO on March 29th at $72.30.

And while the internal momentum indicators look positive, investors should be aware of a potential “triple-top” pattern in the $82.50 price area.

Rio Tinto

 

 

 

 

BoA Slips Lower On Weaker FICC Growth

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Bank of America reported a 34% rise in first-quarter profit last night, topping Wall Street estimates, as the bank benefited from higher interest rates and growth in loans and deposits.

However, BAC under-performed in fixed income, currency and commodities (FICC) trading because of a decline in bond issuance from corporations.

Trading revenue was up only 1%. Equities trading revenue, excluding items, rose 38%, while revenue from trading fixed income fell 13%.

BAC’s trading results mirrored those of rivals JP Morgan and Citigroup; revenue from stock trading rose at both the banks, but weakness in bond trading crimped total trading revenue growth, which is why their share prices remain soft.

To a large degree, the local banks face the same headwinds but with the added risk of the Royal Bank commission.

Hearings from the commission are back on this week with QBE and SUN included in the questioning over insurance related business practices.

Our ALGO engine triggered a sell signal late last year in both QBE and SUN at $10.40 and $14.05, respectfully.

We remain cautious of the local banking names and see the risk continue to be skewed to the downside, especially in the regional names like BOQ and BEN.

QBE

SUNCORP

BoQ

Bendigo Bank