ASX Equity Morning Report 30/08/2012

Overnight Market Snaphot
My observations below should be viewed as general advice and may not be right for you

 

Is it Groundhog Day? Once again, trading in US markets was lacklustre overnight and the session saw equities hover within points of the unchanged line for the majority of the day. Economic data was mostly positive, but did little to inspire trading ahead of the key Jackson Hole event on Friday. As a result the S&P 500 ended higher by 0.1% on light volume.

The second estimate of second quarter US GDP pointed to a 1.7% increase, up from the 1.5% increase that was featured in the preliminary reading. The upwardly revised increase was better than the 1.6% improvement that economists had expected (briefing.com). 

Once again, Australian traders need to be aware of the strong sell off in Iron Ore overnight. The Steel Index tumbled another -4.75% to $90.30 a tonne whilst Mining company Vale shed -2.8%. A number of Brokers are slashing their numbers and we are seeing real capitulation. The major Iron Ore players such as AGO, FMG, MGX and RIO will remain very much in focus today. Also of interest, Energy stocks trailed behind the broader market as crude oil fell over 1.0%. Halliburton lost 1.7% while Schlumberger ended lower by 1.6%.

From a technical standpoint, the S&P500 remains in a short term range from 1395 to 1415. There is a possible Double top pattern in the bigger picture but this will only be triggered on breaks of the low end of this recent range.

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1350,

Resistance Levels: 1415/20, 1450

OZ Stockwatch

Eco Calendar

11.30    AUS Building Approvals (MoM)

Corp Calendar

APN:Ex-div

IAG:Ex-div

NST: Ex-div

FY Earnings: BLY, EVN, KCN, IGO, LLC, MTS, MQA, PPT

Analyst Rating:
LYC: Cut to sell from buy at Deutsche Bank with PTA$0.50

News

HFT: Alan McGrath, professional stock trader and FP Markets client, yesterday said that
a series of erroneous sell orders from broker ABN Amro Clearing for FKP Property Group was so devastating that it could have plunged the company's stock price to zero.  Sell orders for
around 30,000 shares at A40 cents were being placed on July 4 in rapid succession, with the total number of shares on order reaching 166 million, but the orders were cancelled shortly
thereafter.  "I trade full time and the 'bots' are completely dominating the market," he said (AFR)

IRON ORE: Mark Pervan, commodities strategy chief at Australia and New Zealand Banking Group, said that "we are unlikely to see the market bounce back until mine supply starts to wind down in the coming months".  "We expect activity to turn more positive by the second quarter of 2013 as new government policy initiatives start to roll in," he added (Australian)

FMG:  Founder Andrew Forrest buys 5m shares in company yesterday for approx A$20.1m (Bloomberg). 

NCM: Gold producer Newcrest Mining yesterday announced that the forecast spending on its Wafi-Golpu copper and gold venture in Papua New Guinea (PNG) was expected to reach US$9.8
billion, according to pre-feasibility studies.

TSE: Maintenance and construction group Transfield Services yesterday announced that chief executive Peter Goode was resigning, a move that saw the group's share price initially plunge by
6.6 percent to A$1.915 before recovering. 

WOR: John Grill, chief executive of Worley Parsons yesterday said that the engineering group would only be marginally affected by delays to local projects, due to the mining contractor's global reach.  The company's revenues grew by 30 percent in the 2011-12 financial year, while Worley's net debt/equity ratio fell to 24.7 percent from 27.2 percent. 

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. 

-Price scans and Bullish price action: WOR

-Price scan and Bearish price action: DML, FMG, SDL 

-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

LEI: 17.00. Possible breakdown below.

WOR: 25.80 to 26.00. Price initially gapped down through this level yesterday only to recover very strongly. To me, this was Bullish price action despite the initial break of support. Look for follow through to the upside in coming days as long as 26.00 Holds.

FMG: 3.30 to 3.40. Strong breakdown yesterday through the cited support level. Target is 3.30/3.40 potentially based on the weekly chart.

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 4360. Outlier level 4300.

My SPI plan today: SPI futures are indicated at 4342 first thing. Fair value is -13 points and thus this puts the XJO at 4355 early.

Despite the pressure in the resources sector, the broader market has continued to hold in. As stated yesterday, the market remains in a tight range from 4325 to 4360. The chart below shows the support zone at 4325 to 4330 and only breaks of this will open up a potential deeper correction. Given the move in Iron Ore overnight, I think our market is likely to be under some early pressure once again. Traders should look for low risk long scalps out of the low end of this range at 4330 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 Daily:

Price remains at the top end of the range and sturggling here

SPI 15mins:

Key support zone at 4325 to 4330. Look for potential breakdown trades through this triangle pattern and support zone on confirmation.

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.

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 breakdown trade

As stated yesterday, “the more times a support 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.” It appears this is now playing out. 

PDN 30mins: A breakdown trade for Gap fill

A short term range has built and price is testing and breaking the key 1.38 support. This opens up a potential move into the 1.28 open gap thus offering a great low risk setup for traders.

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.

AUDUSD
AUD remains in a short term downtrend and has triggered a potential short term Head and Shoulders topping pattern. As long as price remains below 1.044, traders should continue to focus on this downtrend with a first target into 1.02. There is minor support coming in at 1.035 and breaks of this will increase momentum to the downside..

AUDUSD 60mins:

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