Gold Tops $1300.00 To End The Year

Posted on | by Todd | Leave a Comment on Gold Tops $1300.00 To End The Year

What looked like a price meltdown two weeks ago has turned into a powerful 6% rally that is now attempting to take out key resistance at $1312.

Gold has rallied 11 of the last 13 sessions and has closed above $1300 for the first time in three months.

Our technical view is that the $70.00 rally from $1236 looks more like a short squeeze and much of the buying is from those who got too aggressive going down, with shorts being forced to cover.

Although we are longer-term bullish, at $1307 with the speed and parabolic angle of this rally, we believe a pullback into the $1285 level is a reasonable area to buy.

We added NCM to our Top 50 model Portfolio on December 13th at $22.10.

And while the internal momentum indicators for NCM are not as stretched as they are for Spot Gold, a range trade between $23.50 and $22.60 is possible for this week.

A close above the December 5th high of $23.60 would confirm NCM shares are breaking back into a new, higher trading range.

 

Newcrest Mining

 

ALGO UPDATE: Stay Long Transurban

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We added TCL to the model portfolio on July 3rd at $11.70 and our ALGO engine triggered a buy signal on July 12th at $11.20.

With its $9 billion pipeline of road projects over the next 7 years, the stock should be well supported with increased longer-term cash-flow numbers.

For the six-month period ending December 31st, TCL will pay 28.5 cents per share and a total of 56 cents per share over fiscal 2018.

This equates to 4.5% with the share price at $12.40 (plus some limited franking credits.)

We see the next resistance level at the December 19th high of $13.15.

Transurban

Telstra Continues To Firm Into 2018

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Even with the 10% rally from the $3.34 low posted on November 28th, shares of Telstra dropped close to 30% in calendar year 2017.

We believe that investors were overly focused on past NBN issues and earnings estimates which seem to be pricing in worst case scenarios that assume TLS could be losing its dominate position in the telecommunications sector.

With the best existing mobile network and largest customer base, it’s our view that TLS is best positioned to profit from the growth area of mobile data application outside the NBN.

At $3.65, the projected full year dividend of 31 cents pencils out to an 8.5% yield. We consider TLS a solid addition to portfolios at these levels.

Telstra

 

Will The US Tax Reform Destabilize Global Banks?

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A key part of the US Tax Reform passed last week includes giving US companies a tax break on profits earned and kept in banks overseas.

As per the legislation, US firms can now repatriate offshore earnings at a tax rate of 15.5%, compared with the previous rate of 35%.

In 2005, the Bush administration had a similar “tax amnesty” when over 50 US firms sent back about $350 billion in profits earned overseas.   

In an interview last week, Mr Trump estimated that the total amount of US corporate profits on deposit offshore is between $3 and $5 trillion. 

This is a pretty wide spread. But considering that just 5 tech firms (Apple, Microsoft, Google, Cisco and Oracle) are estimated to be holding over $650 billion offshore, it’s clear that the repatriation numbers will be much higher than in 2005. 

In fact, Apple CEO, Tim Cook, announced that they intend to repatriate over $250 billion during 2018, which is over 70% of the 2005 total spread across 50 firms. 

The most obvious impact of this massive transfer of funds will be the boost in demand for US Dollars. The amnesty plan in 2005 triggered a 12% rally in the USD Index from 81.00 to over 90.00 from March to July.

However, with some EU and Japanese banks already teetering from bad debts and non-performing loans, the short-term implications could be devastating to the banks that have been holding the cash that Mr Trump wants back.

We believe that with just one company like Apple draining $20 billion a month from the European banking system, there will be a negative impact on the health of many EU banks.

At this point we don’t have any clear numbers reflecting the amount of money being held in Australian banks, but we would expect the general strengthening of the USD, on a global basis, will see the AUD/USD retreat back into the lower .7000 handle.

ASX listed stocks which will benefit from the lower Aussie dollar include RHC, QAN, TWE, RIO and NCM.

Aussie Dollar

 

  

 

 

 

 

 

 

 

 

 

 

ALGO Update: Buy The Dip In Sydney Airports

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Shares of Sydney Airport are down today as the company went ex-dividend and will pay shareholders 18 cents per share.

This pencils out to a yield of 4.8%.

SYD has been in our Top 50 model portfolio since July 3rd and our ALGO engine triggered a buy signal on July 31st at $6.70.

With the 52-week high at $7.75, we believe there is a solid argument for owning SYD at or around current levels.

Sydney Airports

 

 

RIO Extends Buy-Back Scheme Into 2018

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Shares of RIO Tinto are trading near a 6-year high of $75.00 as the resource giant announced yesterday that it would buy back an additional $1.9 billion worth of on-market shares by the end of 2018.

This is in addition to the $1.5 billion worth of shares the company bought back in 2017 as part of RIO’s commitment to return the proceeds from the sale of its Coal & Allied assets to shareholders.

With the share price over 8% higher since December 1st, the internal momentum indicators are approaching an over bought condition.

However, RIO has been a cornerstone stock in our model portfolio since March 6th, when it was trading at $61.50, and our ALGO engine triggered a buy signal on April 18th at $58.00.

It’s reasonable to expect some type of price correction in the near-term, but we would expect longer-term buying support in the $71.40 area over the next few weeks.

Rio Tinto

 

ALGO UPDATE: Take Profits In Woolworths

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Shares of WOW were full of holiday cheer as they hit a 4-month high of $27.55 in early trade.

The internal momentum indicators have been in overbought territory for over a week, so we suggest shareholders look to take profits above $27.20.

Our ALGO engine signalled  a sell signal at $26.50 on November 2nd. We see the next key level of support for WOW at $26.60.

Woolworths

ALGO Update: Stay Short Commonwealth Bank

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Our ALGO engine triggered a sell signal for CBA on November 13th at $81.55.

Since then, the share price has dipped to $78.00 but has lifted on year-end buying to $80.40.

The internal momentum indicators are pointing lower and we expect to see a break of the $78.00 level early in the new year.

Clients who are selling CBA short on the SAXO Go platform can place a stop in the $81.70 area, with an initial profit target near the November 3rd low at $77.20

Commonwealth Bank

 

ALGO UPDATE: JHX Is Still In The Sell Zone

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Our ALGO engine originally triggered  a sell signal for JHX on November 22nd at $21.50.

The chart below shows that an additional sell signal was generated at Friday’s close at $22.40.

JHX  has been grinding higher, on lower volume, with support from unexpectedly strong housing data out of the USA.

Over the last week, the US new home sales, building permits and existing home sales have all printed higher than consensus forecasts.

From a technical perspective, JHX is still following a “lower high” pattern based on the May 2nd high trade at $23.20.

With a current P/E of  30.00, the stock is on the expensive side of its industry peers and due for a material correction lower.

 

James Hardie

 

 

ALGO UPDATE: Stay Long NCM

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After posting a low of $1238.00 on December 12th, Spot Gold has moved higher and reached $1270.00 in NY Trade last night.

The response of Newcrest shares has been relatively muted, but we expect a pick up over the near-term.

Our ALGO engine triggered a buy signal for NCM on December 15th at $21.75.

We still prefer the long side of NCM, along with the smaller producers SBM, SAR and EVN, and have an upside target near the November 29th high of $24.25.

Newcrest Mining