ASX Equity Morning Report 29/08/2012

Overnight Market Snaphot

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

 

A rather dull and directionless session overnight in the US markets as equities spent the majority of today's session within points of the unchanged line. The August consumer confidence report printed at 60.6, which was the lowest level in nine months. Following the report, stocks briefly turned lower before snapping back to the unchanged line where they held for the remainder of the session. Volume was very light ahead of the Jackson Hole meeting on Friday where Fed chairman Ben Bernanke delivers his speech at a meeting at Jackson Hole. There was some action in European markets which were rather weak across the board as the Spanish region of Catalonia asked for a bailout from the central government.

A few things to note for Australia traders today. Iron Ore was very weak once more with the Steel Index down -4.6% to US$94.80 per tonne. That puts the decline for this month at almost -13%. Consequently, the materials sector was among the weakest performers. Steelmaker AK Steel slumped 7.4%, in part due to a downgrade from UBS. Peers ArcelorMittal and United States Steel were down between 0.8% and 1.2%.

In yesterday’s report I stated, “I envision a short term range (S&P500) will now form between 1395 to1420 before a more meaningful break either way.” We have seen a small reversal at the top end of the range but there has been no meaningful follow through. I see nothing to change this outlook currently.

US GDP figures are out tonight.

S&P500 15mins:

This is the short term range. Short term traders should continue to focus on these boundaries. 

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1350,

Resistance Levels: 1415/20, 1450

OZ Stockwatch

Eco Calendar

11.30    AUS     Construction work done (Q2)

Corp Calendar

FKP: Shares halted on 6-for-7 entitlement offer priced at A$0.20 per new security, a 33% discount theoretical ex-rights price of A$0.30 (Bloomberg)

GNC: Shares halted on 1-for-11 entitlement offer priced at A$8.80 per share, a 10.1% discount to TERP of A$9.79 (Bloomberg)

FY Earnings: ASL, DML, EWC, GRR, HST, MML, ROC (Interim), SXL, TSE, WOR

Analyst Rating:
Talison Lithium Cut to Hold vs Buy at Stife

News

FLT: The largest travel agency in Australia yesterday reported a 43 percent jump in full-year net
profit to A$200 million thanks to a strong performance from the group’s businesses in Britain, the United States and its operations in Australia.  However, managing director Graham Turner warned that the result would not be replicated in the current fiscal term

LYC: Says completes 1st phase of Malaysian plant, will export residue from plant to allay public concern.

MINING: Representatives from the Department of Foreign Affairs and Trade yesterday confirmed that Australian investment on the African continent is estimated to balloon to A$50 billion in the coming year, with improving finds luring in more producers. 

NCM: The Company said yesterday that production at the Lihir gold mine is suspended until a dispute with landowner has been resolved.

SVW: The media and mining services  conglomerate owned by billionaire Kerry Stokes, is preparing to  postpone the A$3 billion listing of equipment hire group Coates  in response to subdued investor demand (AFR)

TLS: Telecommunications giant Telstra yesterday announced it would broaden its 4G next-generation mobile network to cover 60 percent of the Australian population by the middle of next year, with coverage also expected in the rail tunnel between Sydney's Central and North Sydney stations.

VAH: John Borghetti, chief executive of Virgin Australia, yesterday said the carrier had reached a critical point as more than 20 percent of its yearly revenues were derived from corporate or government markets.  He also warned that the airline was facing a competitive market with levels of
discounting not witnessed "since the days of [collapsed airline] Ansett". 

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

 

-Price scan and Bearish price action: AWE, AGO,

-Support:

BHP: 32.80 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. Please see yesterdays post on “failed patterns”: http://fpmarkets.blogspot.com.au/2012/08/the-most-important-rule-in-chart.html

FMG: 3.85/3.90. Breakdowns of this open up a move to 3.50 potentially.

NCM: 26.00

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

RIO: 50.00

-Resistance

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

CSL: 43.00. 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: 4320 to 4365

My SPI plan today: SPI futures are indicated at 4353 first thing. Fair value is -13 points and thus this puts the XJO at 4366 early.

In the short term, the market is in a tight range with 4325 to 4330 offering strong support. The market hit this zone yesterday once again and bounced strongly. Thus, bears will need to see this zone break for further momentum to the downside. Given the move in Iron Ore overnight, I think our market is likely to be under some early pressure once again. Thus look for possible short fade trades at the 4355/4360 zone. Breaks of this open up a possible move to 4370 which should be strongly offered. As stated, 4330 has been well bid and traders should continue to look for low risk scalps and long entries here with tight stops and join the trend lower should it break.

The market continues to look overextended on the ASX200 Daily chart with several reversal candles out of the 4400 zone. However, the short term trend remains up thus only breaks of the short term support zone shown below will open up increased momentum to the downside. If we keep holding in, it is likely we are set for a move up to the 4450 previous highs for a test.

XJO 15mins:

This is the short term range I am looking at. 4340 to 4350 remains key support. Breaks of this open up a potential move into 4280 in the short term. On the upside, there is solid resistance at 4400. 

SPI 15mins:

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 on 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.

BHP 60mins: A setup for swing traders 

An interesting base pattern has built under the 33.00 neckline. There was an attempted breakout but the stock was unable to hold onto gains. Breaks of 32.50 to the downside would indicate a failed breakout and a potential short trigger. The fact that there was no additional buying above the breakout zone could be indicative of underlying weakness.

FMG Daily: A setup for the Swing traders

The 3.85 to 3.90 has been a good support zone for the stock of late. However, the more times this is tested and the more "obvious" it becomes, the more likely it is prone to a breakdown. FMG is in a solid downtrend and Iron Ore prices are collapsing. Look for potential breakdowns if this support zone goes into 3.40/3.50.

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.

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 trader

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