ASX Equity Morning Report 27/08/2012

Overnight Market Snaphot

My observations below should be viewed as general advice and may not be right for you.

US Indices rose on Friday after beginning the session in the red, after rumours suggested the European Central Bank is considering setting a yield band target as part of the new bond buying program. Indeed, this news broke 15 minutes before the European close and caused a 50 pip spike in the euro as well. The euro ended up giving up those gains, while US stocks managed to build on the strength. At the end of the day, the S&P 500 closed higher by 0.7%. In Fridays Futures report I stated “Tonight I wouldn’t be surprised if there was a bounce attempt out of this S&P500 level after a 2 day sell off” and it appears this played out with dip buyers in control.

It could well be a quiet week with all attention focused on Fed chairman Ben Bernanke as he delivers a speech at a meeting later this week in Jackson hole. Investors expect Bernanke’s speech will signal the central banks views on the prospects for further accommodative policy.  

From a technical standpoint, the S&P500 has challenged and sold off from the key 1425 resistance level. I envision a short term range will now form between 1395 to 1420 before a more meaningful break either way. As I have continued to highlight, breath and momentum are waning at these levels and thus the uptrend is vulnerable. The key support level for me remains 1395 and breaches of this would confirm a deeper pullback and possible new trend lower. My key short term levels in both the DAX and the EUROSTOXX are being tested and sellers in those markets are gaining increasing control.  

S&P500 15mins:

Price bounced right out of the low end of the range and support zone. Only a breach of 1395 would confirm a deeper pullback and possible trend reversal. Short term traders should continue to focus on trading the range. 

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1350,

Resistance Levels: 1415/20, 1450

OZ Stockwatch

Eco Calendar

No major Eco announcements in Australia today.

Corp Calendar

AGG:    Ex-div

ANN:    Ex-div

ASX:    Ex-div

CCL:     Ex-div

SUN:    Ex-div

WPL:    Ex-div

FY Earnings: AGO, AWE, BBG, CTX (1H), IOF, MTU, SKI, TOL

Analyst Rating:
ACR:    Raised to strong buy from buy at BBY; PT A$4.80

SEK:    Cut to buy from strong buy at BBY; PT A$7.58

News

ASX:    Company is getting ready to separate out its charges for the clearing and settlement of trades, an area where currently it is the sole provider of services.  "It will more clearly separate clearing from settlement while overall at the exchange level it does not change our revenue line," said ASX chief executive Elmer Funke Kupper (AFR).

BHP:    CEO Marius Kloppers sees long-term price declines for its commodities; company begins offshore evacuations as Tropical Storm Isaac approaches; says WA approved two new port inner harbour berths for its iron-ore exports (Bloomberg)

BTU:     Gets positive decision on climate declaration appeal

CMJ:    ACCC to issue report on Sept 13th on Seven’s proposal to acquire all Consolidated Media shares it doesn’t own.

ORI:      Company has been given approval by the NSW Department of Planning for an expansion of its Kooragang Island ammonium nitrate plant that may cost up to A$700 million.  Following a series of pollution incidents at the plant last year that culminated with NSW Premier Barry O'Farrell stating the plant would be shut down if there was another such incident, the future of the plant has been under a cloud.

WES:    United States membership warehouse retail operation Costco  is looking to break into the A$15 billion-plus discount petrol business in Australia by selling petrol cheaper than that Coles (WES) and WOW make available utilising their shopper-docket systems.  Costco is waiting on council approval for petrol outlets at its second planned store in Sydney and its first in Brisbane.

Technical

The following stocks are now testing their respective levels. I have derived these levels using my own discretion and please contact me if you would like me to describe and expand upon this analysis.  Keep these areas on your radar for tradeable opportunities

-Bullish Candles and price action: KCN, SAR

-Bearish Reversal candles and price action: ANZ, MGX, ORG

-Support:

BHP: 32.90 to 33.00. A strong base pattern has built under this 33.00 neckline. As long as this zone holds, there is potential for a move up to the 34/34.50 target zone. Note that “failed” breakout patterns are indicative of underlying weakness so if the stock cannot hold this key level, further selling pressure may well ensue.

SUL: 7.80 to 8.00. There was a gap down post the company’s earnings. Price is now testing a key support level within a strong uptrend.

WOR: 25.80 to 26.00. This is the neckline of a solid base pattern.

-Resistance

ANZ:  25.00. A confluence of resistance levels and trendlines coming in here.

CSL: 43.00. Weekly Double top zone.

IAG: 4.00. Weekly Double top zone. 

ASX200 and SPI Analysis

My observations below should be viewed as general advice and may not be right for you. 

Report season wraps up this week and thus far results have been much better than feared. The bigger winners have been some of the oversold cyclical names such as AMP, BKN, DOW and DOW who all reported better than expected results. According to a consensus of analysts, expectations for EPS growth for the 2012 FY have been trimmed by about 10 per cent (AFR). The adjustment reflects the winding down of unrealistically high expectations against a backdrop of increasingly constrained growth.

My SPI Range today: 4330 to 4370.

My SPI plan today: SPI futures are indicated at 4355 first thing and the Emini S&P500 have opened +2 pts. Fair Value is 15points and this puts the XJO around 4370 early.

As shown in my chart below, the SPI is trading in a short term range from 4320 to 4400. Last week we saw a meaningful double top pattern out of the latter level and thus I favour selling bounces early this week. There is an open gap at 4365 from Fridays trading and this should provide strong early resistance and possible selling opportunities. Breaks of this open up a move to 4375 area. On the downside, the market was well bid at 4325/4330 and I believe this will remain the case until more events out of Europe late in the week.

XJO Daily:

Price is still at the top end of the range and it is difficult to forecast a “breakout” until we see a period of consolidation and then a move above 4400. We have now seen 2 potential reversal candles at 4400 and this now needs follow through to the downside to confirm. 

SPI:

4320 to 4330 looks to be the support zone today. My 4350 level was broken last week but momentum to the downside never picked up pace. 

Stock Charts of Interest

Please feel free to contact me if you would like help or assistance in interpreting the graphs below. You can also follow me o twitter @FP_markets for live commentary throughout the day.

ANZ Daily: A setup for the swing traders

Price is now testing so many resistance points after an extended move higher. Momentum appears to be slowing thus this chart is indicating a potential exhaustion. There is little confirmation yet of a potential turn but keep this on your radar.

IAG Daily: A setup for the swing traders

A bearish reversal candle was left on Thursday out of the 4.00 Double top level. This now offers a low risk entry for those wanting to short this resistance level. The target for any weakness looks to be down at 3.60 initially. 

WPL Daily: A setup for the Swing traders

Wednesday’s announcement was taken negatively by the market and there was a very bearish engulfing candle. Thursday was an inside day and thus breaks of Wednesdays low should open up increased momentum to the downside. In this chart I have shown examples of what followed next post similar reversals. Also note that price closed above the Bollinger band and has now closed back inside which signals a potential overextension and movement back into the lower end of the bands.

SUL Daily: A setup for the Trend Followers

Breakout from a strong base pattern and a clear re-test of the neckline. This offers a low risk entry into the established uptrend.

If you would like to chat live and interact daily with a Senior FP Markets trader, please go to http://www.cfdtradersedge.com.au/. 

In his live chat room up to 50 full and part time active traders share market observations throughout the trading day. This is an invaluable source for active ASX traders.

Contact:
Austin Mitchum. Senior Market Analyst

First Prudential Markets

Email: a.mitchum@fpmarkets.com.au
Office: +61 2 8252 6800 Ext 120
Mobile: +61 0431547026