Buy The Dip In Gold

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Over the last two weeks, the price of Gold has made two attempts at breaking through the $1300.00 mark.

On both occasions, the yellow metal dropped back to find support just above the $1270.00 level.

This technical pattern is known as a “pennant” formation and is a continuation pattern. In this case, the break out points for range extension are $1308 and $1263.

Fundamentally, the case for buying Gold remains compelling. The surge in volatility across global stock markets combined with heightened geopolitical uncertainty supports the logic for owning Gold or Gold mining shares.

We expect the price of Gold to break through the $1300 level over the near-term. Our preferred Gold mining shares are NCM, EVN, SBM and SAR.

Investors looking to profit from a rally in Gold can either buy these shares outright, or buy their CFDs listed on our SAXO Go platform.

Spot Gold

Newcrest Mining

Santa Barbara Mining

Evolution Mining

 

 

 

 

 

 

 

Bank Shares Roiled On Royal Commission Announcement

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Shares of the “big-4” banks are trading sharply lower as the Government announced a $75 million Banking Royal Commission before the ASX open today.

When making the announcement, PM Turnbull said it was a regrettable but necessary action.

The terms of the inquiry are wider than the market expected and will include the entire financial services sector. The final report will be due in February 2019.

We have been giving the banks a wide berth recently due to likely headwinds from slower loan growth and falling profit guidance. We’ll continue to watch the ALGO engine for trade updates and future levels to enter the market.

MVB Aussie Banking ETF

 

 

ALGO Signal: Sell Brambles

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Our ALGO engine triggered a sell signal in BXB on yesterday’s ASX close at $10.19.

This was the highest closing price since June 26th, but still within the technical “lower high” pattern based on the May 29th high trade at $10.70.

We consider the current price level to be near the top of the counter trend range and ready to trade lower.

Fundamentally, BXB is trading at 19X earnings and a 3.1% yield based on FY18 earnings

For those CFD traders using our SAXO Go platform, we see the next significant price support level near the early November lows at $9.40.

Brambles

 

ALGO Update: QAN Shares Are Regaining Altitude

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Our ALGO engine triggered a buy signal in QAN last Friday at 5.60.

Since posting a 52-week high at $6.53 on October 18th, QAN shares have traded down to a low of $5.57 last Thursday.

Technically, the share price is still tracking a “higher low” pattern which is bullish and suggests the recent sell off is a correction within a broader uptrend.

the company is currently trading on a P/E of 13X and will likely improve on the FY 17 after tax profit of $853 million announced back in October.

QAN is also one of the ASX companies that will benefit from a weaker Aussie Dollar as inbound tourism is likely to increase.

Over the near-term we are looking the share price to reach the $6.25 area.

 

QANTAS

 

ALGO Update: Treasury Wine Estates

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Our ALGO engine triggered a buy signal on TWE back in early July at $12.55.

Since then the share price has added close to 20% closing Friday just over $15.80.

The company, with a market cap of $11.11 billion, recently declared a final dividend of 13 cents per share, 50% franked, bringing the total dividend for FY17 to 26 cents per share, a yearly increase of 30%.

TWE has a portfolio of more than 70 brands, including Penfolds, Pepperjack and Lindeman’s, with sales operations in more than 70 countries.

French wine growers have suffered recently on the back of unfavorable weather which has resulted in vineyards in wine-growing regions such as Bordeaux and Champagne being damaged by frost.

As a result, the French Agricultural Ministry has reported wine production will fall by about 20%, leading to the lowest level of output in more than 60 years.

In addition to the strong sales growth in Asia, we consider the lower European wine production as a bullish development for TWE and expect further share appreciation into the end of the year.

Treasury Wine Estates

 

 

 

 

Buy WPL Into The OPEC Meeting

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The price of West Texas Intermediate (WTI) Crude Oil hit a 2-year high of $58.40 in NY trade yesterday. For the month of November, the price of WTI has rallied over 10%.

Much of the bullish trade has been driven by comments from OPEC members that the cartel will be able to extend their oil supply curbs put in place earlier this year.

Currently, OPEC, Russia and nine other producers have reduced oil output by 1.8 million barrels per day. Crude Oil prices have firmed on the expectations that they will extend that agreement beyond March 2018 when they meet in Vienna next week.

If they are successful in extending the deal, it would give Crude Oil prices an additional lift towards the $60.00 area.

Shares of WPL traded to $33.35 on November 7th.

News of Shell Oil divesting from the company triggered a sharp $3.00 drop to $30.35.

With the current share price at $31.55, it’s reasonable to expect WPL shares to trade back above the $33.00 handle if WTI trades back to $60.00.

Woodside Petroleum

 

ALGO Signal: Sell James Hardie

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Our ALGO engine triggered a sell signal on JHX at $21.51 at yesterday’s ASX close.

Internal momentum indicators have been showing an “overbought” pattern since November 10th, which supports the ALGO Sell signal.

The fundamentals in the building materials sectors have been mixed, but we expect a softer tone overall going into the end of the year.

Our first downside target is at $20.40 with a bigger level of support near the November 6th low of $19.20.

James Hardie

 

 

Is Retail Food Group In The Buy Zone ?

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Shares of RFG have traded as high as $6.25 in January of this year. Since then the price has dropped over 30% to the current level of $4.40.

RFG is now priced at a trailing P/E of 12X , which is lower than the industry standard of 23X.

The stock is currently trading at -51% below its intrinsic level of $8.9. This mismatch indicates a potential opportunity to buy low as MD Andre Nell expects underlying net profits to rise about 6% in 2018.

Finally, its debt relative to equity is 54%, which has been diminishing over the past couple of years showing its capacity to pay down its debt.

Ramsay Rallies After AGM Statement

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Shares of Ramsay Health Care have jumped over 3.5% to $67.25 in early trade after the release of its AGM statement.

According to the release, management reaffirmed that it expects its core earnings per share to grow between 8% and 10% for FY 2018.

Based on the market reaction, investors may have been expecting the company to downgrade its guidance considering that private hospital cover has dropped to it lowest level in five years.

For a high capitalization stock, RHC trades on high volatility and wide trading ranges.

The “lower high” pattern is still in place with key resistance in the $68.30 area and support near the September lows of $61.20.

 

Concensus EPS for FY18 $2.84 v $2.35 for FY17

 

 

Crude Oil Slips Lower After IEA Report

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Spot Crude Oil prices fell sharply in overnight trade after a report from the International Energy Agency (IEA) said that global oil demand is much weaker than OPEC consensus figures and will weaken further in 2018.

The report also showed that US shale, and other non-OPEC producers, will add an additional 1.4 million barrels per day of supply on top of the fall in demand.

These comments pushed the front-month WTI Crude contract down over 2% to $55.10.

Oil traders have gained confidence in the rebalancing effort lately, with impressive OPEC compliance and a high likelihood that the cartel extends its production cuts, perhaps through the end of 2018, when they meet later this month.

We continue to like WPL and ORG as our preferred buy-side opportunities.