ASX Morning Report 17/08/2012

Overnight Market Snaphot

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

The breakout from the recent consolidation range finally occurred last night. The S&P 500 rose 0.7% to 1,415, its highest closing level in 4 months, as Cisco Systems sales topped estimates and US building permits surged. There was also growing speculation in Europe that Spain is about to get an emergency disbursement from a 100 billion-euro ($123 billion) package. 

From a technical standpoint, US indices are now challenging their April highs which should provide short term resistance. It was also interesting that AUD once again failed to follow the move in Equities overnight.  However, the mere fact that the markets is this high despite all the macro headwinds and the ongoing Euro crisis is a sign of genuine strength. No doubt volume and breadth continues to wane but it is very difficult to fight a rising market. The short term trend remains up. Only breaks of the key short term support level at 1390 would confirm a pullback and possible new move lower.

S&P500 5mins:

This is the consolidation pattern I have been showing of late. The market failed to breakout on its first attempt but there was no follow through to the downside. With the market failing to breakdown, there is only one other option left- a breakout higher. 1395 remains a marker for bulls and bears alike.

S&P500 Emini Key Levels:

Support Levels: 1390/1395,1350,1325

Resistance Levels: 1420, 1450

OZ Stockwatch

Eco Calendar

No major Economic data in Australia today.

Corp Calendar

ANZ:     3Q update. 

APN:    1H results

DUE:     FY earnings

QBE:    1H results

STO:     1H earnings;

News

ABC: Cut to neutral from outperform at Credit Suisse, PT A$3.15

ASX: Cut to neutral from overweight at JPMorgan; PT A$31.87

AMP: Craig Dunn, chief executive of AMP yesterday said  the financial services giant was perfectly positioned to handle the structural difficulties facing the retirement savings  sector, with the integration from last year's A$4 billion takeover of rival AXA Asia Pacific nearly complete. 

NCM: JV partner Harmony Gold posts 4Q loss and increased Wafi Golpu spending

ORL: To lose Ralph Lauren license worth 35% of earnings; cut to neutral from outperform at Credit Suisse with PT A$8

WES:  Yesterday announced that it would inject more than A$2 billion into its industrial and retail network operations this fiscal year. "Our feeling is the Australian economy is in relatively good shape at the moment," managing director Richard  Goyder said.

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:

OZL: 7.00

WOR: 25.80

UGL: 10.85 to 11.00

-Resistance

AMP: 4.35 to 4.40

ANZ:  24.00.

BHP: 33.00. Breakout pattern in play above this level.

BXB: 6.50. Breakout pattern in play above this level.

ILU: 10.65. Breakout pattern in play above this level to 11.00

NCM: 25.50. Confirmed bearish reversal.

ORG: 12.50 to 12.75 

STO: 11.50 then 12.00

WPL: 34.50 to 35.00

ASX200 and SPI Analysis

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

I will be the first one to admit that yesterday’s strength certainly took me by surprise. Despite little initial direction from offshore markets, strong results from AMP and WES drove the market higher with the ASX200 closing up 1.14% on reasonably good value of $4.5bn. Investors continue to favour the Consumer Staples sector and the Banks over the Resources sector and this was seen with FMG losing 1.9% and AWC diving 7.6% despite the overall strong market. 

From a technical standpoint, the market is still very much at the top end of the range and right into a formidable resistance zone as shown below. Indeed, price is even beginning to look vertical which always makes me concerned as often this is not sustainable. However, once again it is tough to fight a rising market and traders need to focus on their underlying stock setups and their risk/reward profiles at these levels.

BHP appears to be building an interesting base pattern under the 33.00 level. Keeps an eye on this level for potential breakout trades going forth. If the ASX is to continue its recent strength, we need to see BHP follow through this 33.00 level to the upside.

My SPI Range today: 4280 to 4320. Outlier levels 4350.

My SPI plan today: SPI futures are indicated at 4310 first thing. Fair value is now 23 points and thus this puts the XJO at around 4330 on open. The first 30minutes of trading will be key today to see if we can hold onto recent gains. No doubt the market appears stretched but there could possibly be more follow through from yesterday’s strength. On the upside, 4320 should provide early strong resistance. If the market fails to sell out of here, the bigger picture target is up at 4350. On the downside, the SPI should be well supported at 4290 which was yesterday’s closing highs and an open gap target.

XJO Daily:

 No follow through to the downside after the recent reversal candles. However, still a solid wall of resistance here.

SPI:

The SPI tried to break below 4240 support zone but there was no momentum and a strong short covering rally has ensued. The trend remains up.

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 Daily: A setup for the Breakout traders

A potential base pattern has formed that will be triggered on a break of 33.00. 

LEI 60mins: A setup for the Breakout Traders

Price broke out above the 17.00 level and base pattern. Retests of this zone offer a potential low risk long entry. 

AMP Daily: A setup for the swing traders

After yesterday’s results, AMP is now trading right into solid overhead resistance which should be tough to break through on first attempt. Furthermore, yesterdays candle closed outside the Bollinger Bands which implies an overextension. I have shown examples here in the past where this occurred. Price subsequently sold off back into the range in these examples.

ORG Daily: A setup for the Trend Followers

The stock has now rallied right into formidable overhead resistance. The trend is down as shown by the downward sloping trendline and the downward moving averages.

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

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