OSH Nears Resistance at $7.90

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The price of West Texas Intermediate Crude Oil (WTI) posted its largest weekly advance in over four years.

The 9% gain for the week in WTI also lifted the local oil names, including OSH, STO and WPL

Our ALGO engine triggered a buy signal in OSH on February 13th at $7.10.

At the time, our initial upside target was at $7.70.

With today’s high posting of $7.75, We can see the logic in taking profits in OSH and rotating into WPL.

Taking into account the sharp selloff after announcing a capital raising on February 2nd, we consider WPL a better long-term value in the oil sector.

Oil Search

Woodside Petroleum

Orgin Energy Is Approaching Full-Value

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Shares of ORG have a stable outlook, but are approaching an overbought condition relative to its fundamentals.

A mild Summer combined with reduced weather related events has seen a drop in demand which could act as a headwind to significantly higher share prices.

Our ALGO engine triggered a buy signal for ORG on February 13th at $8.30. Since then, the share price has run into resistance twice at $9.40.

We suggest that investors can look to sell the $9.50 calls to increase cash-flow enhance overall portfolio returns.

Origin Energy

 

US Yield Curve Continues To Flatten

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Even though the US Stock market has stabilized over the last week, the US Treasury curve continues to flatten.

As illustrated in the chart below, the difference  between the US two and 10-yr bonds has now dropped to 46 basis points (2.36% vs 2.82%).

This is the first time since 2007 that this spread has narrowed below 50 basis points, and, in the past, has been a level which has foreshadowed recessionary pressure.

It’s our base case that the bulk of the curve flattening has been a result the two-yr yields rising quickly and the longer dated yields trading sideways to lower.

In this respect, we would expect some of the local yield names to find some buying support this week.

Some of the stocks we prefer include; TCL, SYD, WFD, AMC and GPT.

For more information about how to trade the US yield curve, call our offices on 1-300-614 002

2-yr versus 10-yr yield spread

Transurban

Sydney Airport

Westfields

 

 

 

FMG Is Good Value At Current Levels

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Shares of FMG posted their first close above $4.50 since March 27th.

This time last year the share price was close to $6.50, which is about a 30% drop over the last 12 months

We forecast earnings of about 50 cents per share in 2018, a decrease of 34% on the previous 12 months. This puts the current share price at a P/E ratio of 7.6 based on 2018 earnings.

The company currently has a market cap of just over $13 billion and $5.5 billion in debt. The forecast for 2018  EBITDA  is around $6 billion, depending on stable Iron Ore prices.

These are just a sample of the key metrics which suggest FMG shares are undervalued and will offer investors good upside price performance over the medium-term.

Fortescue Metals Group

 

 

 

ALGO Update: Stay short CCL

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Our ALGO engine triggered a sell signal for CCL on December 15th at $8.60.

As illustrated in the chart below, the share price has formed a “triple top” formation at the $9.10 level over the last 8-weeks.

In their last report, CCL booked a 10% rise in earnings for its alcohol and coffee business, while the soft drink, juice and energy business fell 6.5%.

We see the first level of support at $8.50, followed by $8.10.

Investors trading on our SAXO Go platform can look to sell CCL with a stop order just above $9.20

Coca-Cola Amatil

 

 

 

Newcrest Firms As Spot Gold Approaches The Top Of The Range

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The price of Spot Gold has been trading in a broad “pennant” formation since early January.

The range of this pennant are bound by the January 25th high of $1365 and the March 19th low of $1307.

We believe that the balance of fundamental and technical analysis supports the idea that the pennant will be resolved to the upside with Gold trading back above $1365.

The share price of NCM has been beaten down about 15% since a tailing dam failure at their Cadia mine in NSW in early March.

With their quarterly production report scheduled to be released on April 26th, we believe the stock has found a solid base in the $19.40/50 area for a move back into the $22.00 handle over the medium-term.

Newcrest Mining

Spot Gold

OZL Firms On Higher Copper Prices

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Since posting a low of $2.90 per pound on March 26th, the price of US High Grade Copper has risen over 6% and closed at $3.08 in NY Today.

This is good news for shareholders of OZL as the share price has traded back over $9.20 in early trade.

Our ALGO engine triggered a buy signal in OZL on December 12th at $8.60, and the stock is also included in our ASX Top 100 portfolio.

We see a key resistance area in the $9.35 area; once that level is broken, we expect to see solid range extension back into the $10.00 handle.

OZ Minerals

 

 

Telstra Is Back In The Buyzone

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Shares of Telstra have been under pressure for the last 12 months and posted an 8-year low of $3.08 in early trade today.

Investors’ concerns over the telco giant’s profitability and decision to cut its dividend have been the driving forcesa in the share’s decline.

We remain upbeat on the TLS’s prospects and expect market sentiment will soon become positive.

It’s reasonable to expect that the Federal Government will decide to write down the value of the NBN, which will lead to higher margins for TLS.

This would make its 22 cents per share dividend secure over the longer-term.

At the current share price, that pencils out to a fully-franked yield of 7%.

Telstra

Aussie Dollar Dragged Lower On Tariff Fears

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As tensions between the US and China escalate, Australia sits uncomfortably in between its biggest export market and its largest investor.

Government data show that almost 30% of all Aussie exports are sent to China, while the cumulative amount of US investments in Australia is over $850 billion as of the end of 2017.

In addition, US overnight interest rates are now higher than Aussie rates for the first time in over 18 years, and the domestic current account deficit has swelled to 2.2% of GDP

This combination of factors leaves the AUD/USD vulnerable to a protracted down move over the course of 2018.

Investors looking to profit from a lower AUD/USD can buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the price of YANK increases as the AUD/USD trades lower. It also has a weighting of 2.5%, which means the unit price will fluctuate  by 2.5% for every 1% change in the AUD/USD exchange rate.

With a current price of $13.60, we calculate that the price of YANK will be near $16.50 as the AUD/USD returns to the January 2017 low of .7160.

BetsShare ETF: YANK

 

ALGO Buy Signal For Tabcorp

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Our ALGO engine triggered a buy signal for TAH into yesterday’s ASX close at $4.22.

This “higher low” pattern is referenced to the $4.16 low posted on October 18th, 2017.

Since the company last reported earnings in February, the share price has dropped over 20%.

Technically, the price has reached oversold territory. Fundamentally, we feel investors are currently overlooking the cost savings of the newly merged company.

We believe TAH represents good value at in the $4.25 area and that shares will rally into the next earnings report scheduled in August.

TAH will also pay a 12.5 cent dividend in August, which pencils out to a 5.9% annual yield.

Tabcorp