Shares of SUN hit a 3-week low of $13.43 as the downside momentum in local financial names continues to increase.
SUN announced today that they will snug interest rates higher on all variable rate home loans next Wednesday due to higher funding costs.
Our ALGO engine triggered a sell signal in SUN on November 10th at $14.05.
We will look to cover short positions near the February low of $12.45.
SunCorp
Our ALGO engine triggered a sell signal in SHL on February 5th at $24.85
In our blog post from March 3rd, we set an initial downside target of $23.10.
Shares of SHL hit $23.00 yesterday and we closed out of our short CFD positions on the SAXO Go platform.
At 21X estimated 2018 earnings, the stock looks more attractive at $23.00, than at $25.00
However, given the heightened volatility in the ASX market in general, we will remain flat in SHL and advise clients when we look to enter another position.
Sonic Health
Local banking stocks will be facing higher funding costs as LIBOR rates have surged higher over the last few weeks.
Considering the negative combination of the Royal Commission and lower margins on Mortgage lending, we have been urging caution to investors looking to buy the recent dips in the Big 5 banking names.
As illustrated in the chart below, the cost of local bank funding has posted the sharpest monthly rise in over 8 years.
As such, we don’t believe the local bank shares have found sustainable price support levels yet.
Phone in for more details on trading the local banking stocks on a cash basis and on the SAXO Go CFD platform
LIBOR
West Texas Intermediate (WTI) Crude Oil rose over 3% in NY trade to reach a 7-week high of $65.70.
The boost was a result of EIA data showing US crude stocks unexpectedly fell by 2.6 million barrels, or 0.6%.
For the week, WTI has risen over 5%.
In Monday’s blog, we mentioned our preference to buy local names STO, WPL and OSH.
These three stocks are up over 2% for the week and we still see scope for further upside range extension. Also, all three of these stocks are in our ASX Top 50 Model portfolio.
On the daily charts, the next area of resistance for STO is near the $5.65 level, with support at $4.90.
The chart of OSH shows resistance at $7.70 and support at $7.05
The valuation metrics for WPL are more complex. The share price has under performed the Spot WTI price by 24% since September and is 21% below it’s EPS momentum trend.
At 6.50 X EBITDA, WPL may be the best pick for a move back into the price gap above $29.65.
Santos
Oil Search
Woodside
Our ALGO engine triggered a buy signal in OZL at $8.60 on February 12th. Since then, the share price hit a high of $10.00 on February 27th.
OZ Minerals has a market cap of $2.793 billion. They primarily focus on exploration, development, mining and processing of projects within Australia.
OZL are mainly focused on mining Copper and Gold, while holding ownership of the Prominent Hill mine in South Australia.
The company is largely debt-free while holding an overall cash balance of $729 million back in late December 2017.
We see good support at the $9.00 area and upside potential of $10.45 over the medium-term.
OZ Minerals
The price of West Texas Intermediate (WTI) Crude Oil rose 3.5% last week and settled just over $62.00.
This places WTI pretty much in the middle of the $66.80 to $58.00 range we have seen so far this year.
What makes this noteworthy is that last week’s rally coincided with a rally in the USD. In short, the USD vs Crude inverse correlation looks to be diminished for now.
The technical picture in WTI is improving and the next upside target is near the February highs of $63.40.
As a result, shares of STO, WPL and OSH are all up over 1.5% in early trade today.
All three of these stocks are in our ASX Top 50 Model Portfolio and we prefer the long side from current levels.
We’ll update each of these stocks in subsequent postings.
Woodside Petroleum
Oil Search
Santos
Our ALGO engine triggered a sell signal in Galaxy Resources into Friday’s ASX close at $3.57.
The “lower high” pattern is referenced to the January high near $4.50.
Lithium stocks, in general, have seen downward pressure recently after the release of a research paper which estimated Lithium production would double by 2025.
From a technical perspective, we see scope for GXY shares to retrace back to the $2.80 level.
Galaxy Resources
The Price of Spot Gold slipped to a 3-week low of $1309.00 as the inverse correlation to the USD strength continues to influence price flows.
By the NY close, the yellow metal had found buyers into the weekend to settle at $1314.00.
With the FOMC expected to raise the FED Funds target on March 22nd, market commentators have noted that the price of Gold has rallied after the last 5 rates hikes in this cycle.
As illustrated in the chart below, Spot Gold traded at $1240 when the FOMC last raised rates on December 13th. By January 25th, Gold had rallied almost 10% to reach $1350.
Some of the local mining names we are following into the buy zone include NCM, EVN, SBM and SAR.
In addition, investors looking for a “pure play” on Spot Gold can buy the BetaShare Gold ETF with the symbol: QAU
Spot Gold
BetaShare Gold ETF: QAU
Shares of WES have opened over 5% higher to $43.60 as the company announced that it will divest its Coles grocery business into a stand-alone ASX listing.
This new entity will be made up of over 800 supermarkets and bottle shops, 700 gas stations and 88 hotels.
The action will result in WES shareholders being granted shares in the new Coles business after WES retains a 20% equity holding.
This is all pending board, shareholder and regulatory approval.
WES was added to our Top 20 Model Portfolio about 2 years ago at $39.05. We would consider WES a Buy/Write opportunity at current levels.
Wesfarmers
Shares of FMG are firming back over $4.80 in early trade as Spot Iron Ore prices rose for the second consecutive day to reach $72.00.
Analysts have pointed to the end of China’s winter curbs on metal production as supporting demand for all grades of Iron Ore over the near-term.
Internal momentum indicators on the daily charts are improving and we see the next resistance level at $5.25 and support at $4.60.
FMG is part of our Top 50 Model portfolio and we suggest that investors can buy the stock at current levels for a move back into the $5.40 area over the medium-term.
Fortescue Metals group
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