Chinese Imports Rise In Front Of 5-Year Plenary

Posted on | by Todd | Leave a Comment on Chinese Imports Rise In Front Of 5-Year Plenary

Chinese import data released on Friday showed a surge of 18.7% on a year-on-year basis.

Leading the the stronger import numbers was Iron Ore.

Purchases of Iron Ore expanded to 102.8 million tons compared to 93 million tons during the same time last year. Compiling the data for the first nine months of 2017, full year purchases are on course to top 1 billion tons.

Shares of RIO and BHP have responded by rising by 2% and 2.5%, respectfully, in early trade

China will convene its five-yearly congress on Wednesday. Some reports suggest that the rise in raw material imports into the lead-up of the Communist Party meeting may not be sustainable.

Looking at the daily charts, we see near-term resistance for BHP at $27.50 and at $70.70 for RIO. 

BHP

Rio Tinto

 

Chart Watch: The XJO Index

Posted on | by Todd | Leave a Comment on Chart Watch: The XJO Index

The XJO 200 Index continues to trade within a broad, sideways “Flag” pattern bound by the June 8th low of 5624 and the June 15th high of 5834.

The low price for the week at 5637 was the result of weakness in the banking names, as well as, a drop in major miners BHP and RIO; which lost 2% and 1.5% for the week, respectively.

The continuation of the “lower high” price pattern suggests a downward bias with the next key support level near the February low of 5578.

ASX XJO Index

ALGO Update: Sell Signal In QRE

Posted on | by Todd | Leave a Comment on ALGO Update: Sell Signal In QRE

Our ALGO engine triggered a sell signal in the BetaShares Resource ETF with the symbol QRE at $4.85.

QRE is comprised of 10 ASX stocks which include BHP, Bluescope Steel and Caltex. The weighting is such that BHP, RIO and WPL make up over 50% of the ETF pricing.

Frequent blog readers will remember that we had a generally bullish outlook on the resource sector back in mid-March, and advised clients to buy QRE in the $4.50 area and BHP in the $22.50/70 price range.

We now agree with the ALGO engine that the resource names look fully valued overall.

We suggest that investors who are holding BHP can either take profits in the $26.25/50 area, or write covered calls at $26.50 into November to enhance portfolio returns.

BetaShare ASX Resource ETF: QRE

 

BHP

BHP Rebounds From Last Year’s Losses

Posted on | by Todd | Leave a Comment on BHP Rebounds From Last Year’s Losses

Shares of BHP are up over 1% in early trade as the mining giant announced a USD 6.73 billion full year profit and declared a final dividend of 43 cents per share, which lifts the full-year dividend to 83 cents per share.

Higher prices for both Iron ore and Coking Coal helped contribute to the improved performance over the course of the year.

The company also announced that it wants to sell off its US Shale oil assets, as they have not performed to plan.

In our blog update from July 26th, we suggested that investors could sell European-style call options at the $26.00 strike price into November.

We still see limited upside to BHP above $26.50 and repeat that suggestion to enhance portfolio returns for investors holding BHP shares.

BHP

 

Resource Basket – Algo Signal Review

Posted on | by Leon Hinde | Leave a Comment on Resource Basket – Algo Signal Review

In late May our Algo Engine started flagging the “higher low” structure in large cap resource names, including a number of resource specific ETF’s.

Within the ASX 100, FMG, RIO and BHP were the standout Algo Engine buy signals. In client portfolio’s we allocated towards BHP as our preferred exposure.

Over recent weeks, a rally in Iron Ore prices from US$56 per tone to US$72 per tone, has helped to accelerate the share price advance, and crude oil back at almost $50 per barrel has helped BHP.

Fund managers continue to position in BHP ahead of a potential corporate restructure, as the market speculates on the divestment of the US shale and energy assets, into a  separate listed US company.

BHP reports on the 22nd August .  Assuming FY17 total dividends of $1.10, BHP trades on a 4.7% yield. EPS forecasts into FY18 should remain similar to FY17 at around $1.70 per share.

Chart – BHP
Chart – RIO
Chart – FMG
Chart – QRE

 

 

 

 

 

Algo Update – BHP & WOW

Posted on | by Leon Hinde | Leave a Comment on Algo Update – BHP & WOW

Recent Algo Engine buy signals in BHP and WOW continue to perform strongly.

An overnight rally in metal and oil prices will support BHP in today’s trading   and investors may wish to consider selling covered calls into November, at or near the $26 strike price.

Chart – BHP

Woolworths reports earnings on the 23rd August and the market will be looking for underlying EPS growth of 8% to support the 22x earnings multiple.

With WOW now trading on forward yield of 3% and a relatively high multiple, we encourage investors to sell $28 Dec call options to boost the annual cash flow return.

Chart – WOW

 

OVERNIGHT News: FOMC and Crude Oil

Posted on | by Todd | Leave a Comment on OVERNIGHT News: FOMC and Crude Oil

The FOMC announcement to raise the target Fed Funds rate by 25 basis points to 1.25% was largely priced into the market.

However, the “hawkish” guidance  about further upward adjustments and the specific plans to reduce the FED’s $4.5 trillion balance sheet have raised concerns about current stock market valuations and the impact of tighter monetary conditions.

The major US indexes were mixed with the NASDAQ down .50%, THE Dow Jones 30 up .25% and the SP 500 down .10%.

US Energy stocks were all lower as Crude Oil prices slumped on a downbeat assessment from the IEA and increased production from both the US and OPEC nations.

The front month WTI Crude contract closed down over 3% to $44.65, which is the lowest closing price in over 18 months.

As a result, shares in both BHP and Oil Search have opened more than 2.5% lower.

Chart – Dow Jones