ASX Equity Morning Report 28/08/2012

Overnight Market Snaphot

 

US Indices began the session on a positive note but were unable to hold onto gains, and retreated to the unchanged line come the close. Technology stocks outperformed the broader market with AAPL advancing 1.9% after the company won its patent battle with Samsung. Stocks in the materials space underperformed the broader market. The sector was dragged down by Freeport-McMoRan and Dow Chemical, both of which were down near 1.5% (briefing.com).

Volume was very light and this could well continue throughout the week with all attention focused on Fed chairman Ben Bernanke as he delivers a speech at a meeting on Friday at Jackson hole. Furthermore, there are 3 major upcoming announcements within Europe namely the German court decision on the constitutional validity of the Euro bailout funds; the ECB announcement on its Spanish bond buying program; and the report by international creditors on Greece’s fiscal progress. These are all significant risk events and trading may well remain subdued until more clarity emerges. I remain cautious from a technical standpoint as shown in these pots: http://fpmarkets.blogspot.com.au/2012/08/double-tops.html AND http://fpmarkets.blogspot.com.au/2012/08/futures-and-fx-report.html

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1350,

Resistance Levels: 1415/20, 1450

OZ Stockwatch

Eco Calendar

11am AUS New Home Sales (MoM)

Corp Calendar

AMC:    Ex-div

BLD:     Ex-div

ORG:    Ex-div

PBG:    Ex-div

TWE:    Ex-div

FY Earnings: ABP, BPT, CRF, CHC, FLT, FKP, SVW, VAH

Analyst Rating:
AWE: Cut to underweight from overweight at JPMorgan; PT A$1.75

 

News

AGO:    Miner Atlas Iron yesterday forecast that the spot  price of iron ore would rise significantly over the next two  months due to strong demand from China.  The company announced a A$114.6 million full-year loss, down from a net profit of A$168.6 million the same time a year ago, but executive director Mark Hancock remained optimistic.  

AGK:    Says court upholds approvals granted for Gloucester Gas Project’s concept plan and stage 1 development

BHP:     Global miner BHP Billiton has struck a US$430 million deal to sell its Yeelirrie uranium deposit in Western Australia to miner Cameco.  

NAB:    Cameron Clyne, chief executive of National Australia Bank yesterday rejected assertions that the investment boom in the mining sector was coming to an end.  (AUSTRALIAN)

SDL:     The board of miner Sundance Resources yesterday accepted Hanlong Group's lowered takeover offer of A45 cents a share, but has won the ability to seek out other suitors as a
result.  The Chinese miner's A57 cents a share bid was accepted last year, but the chief economic planning body in China refused to approve the acquisition unless Hanlong reduced its offer.

TOL:     Brian Kruger, chief executive of Toll Holdings, yesterday announced that the logistics firm's main source of growth over the next financial year would be the resources sector, with the company's retailing division struggling (AFR).

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

-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.

My SPI Range today: 4305 to 4355.

My SPI plan today: SPI futures are indicated at 4337 first thing. Fair value is 13 points and thus this puts the XJO at 4350.

Yesterdays SPI plan worked to a tee. I said “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”. The market made a high of 4366 SPI and sold off to hit a low of 4327. My intention is not to gloat but to show how using technical setups and levels can work to your advantage. Clearly the market is struggling at these levels but only breaks of 4320 will open up increased momentum to the downside. Thus look for early support at 4320/25 and possible long scalp opportunities. Any failure to bounce meaningfully out of this zone opens up a breakdown into the 4300 round number and possibly lower. On the upside, 4350 to 4355 should prove to be strong resistance and offer low risk short entries into this short term downtrend.

XJO Daily:

Price is still at the top end of the range and is showing increasing signs of exhaustion in the short term with several reversal candles in place.

SPI:

This chart shows the gap test yesterday that provided a low risk short opportunity for traders. After 3 tests of the 4345 level intraday, a breakdown ensued with the market closing on its lows. 4320 to 4325 remains key support today. 

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.

Hang Seng Daily: A setup for Macro Traders

The Hang Seng has struggled at this 20,300 resistance zone. In the bigger picture, a Head and Shoulders pattern is forming. Price is now breaking down through 20,000 and thus triggering a possible short term rounded top pattern. This market is well off its March highs and noticeably underperforming global indices. This is a sign of underlying weakness.

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.

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