ASX Morning Report 21/08/2012

Overnight Market Snaphot

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

It was another lacklustre session in the US markets overnight with indices trading in a tight range on thin volume. After reaching lows during the first hour of trade, stocks staged a slow recovery that lasted for the remainder of the session. As a result, the major indices ended flat. 

There were, however, a number of things that caught my attention overnight. It was the defensive sectors that were the day’s standout performers, most notably Healthcare. Some of the biggest losses were registered in the homebuilder and material stocks. This is not indicative of a “risk on” type scenario. Furthermore, it was interesting to see European markets rally very strongly on the open but unable to hold onto gains, selling off to finish well off their highs. There were Shooting Star closing candles left on both the Dax and Eurostoxx daily charts which are bearish reversal candles. 

For the APPLE lovers out there, last night’s 2.6% rally to all time highs at $665 made it the most valuable company in history. For the bears and APPLE haters out there, this stock is just a fraction off the “666” level which incidentally coincided with the S&P500 market bottom in 2009. Are we now looking at the inverse and a potential top at “666”?

From a technical standpoint, US indices are now challenging their April highs which should provide short term resistance. Indeed, these markets are setup for possible “Double Top” trades that many technicians and traders will be watching. For now the short term trend remains up and only breaks of the key short term support level at 1395 would confirm a pullback and possible new move lower. 

  

S&P500 Daily:

Price is now challenging the April highs and set up for a Double Top trade. There is a similar setup in the Nasdaq and Dow Industrials.  

S&P500 Emini Key Levels:

Support Levels: 1390/1395,1350,

Resistance Levels: 1415/20, 1450

OZ Stockwatch

Eco Calendar

No Major economic announcements in Australia today.

Corp Calendar

WES:    Ex-div 95c

Full year 2012 Results: AMC, ARI, CFX, CPA, CQR, CMJ, MGR, MND, MMS, OST, SHL, WHC

News

BSL: BlueScope Steel yesterday forecast that it would only "break even" over the second half of the year as concerns increased that Chinese producers would dump steel products through Asia and Australia. "There is no doubt Chinese product  is trying to find its way around the region post the [global financial crisis] China's steel industry had been over-stimulated and we'll see a significant restructuring of the  Chinese steel industry in the next few years," Paul O'Malley CEO said.

WPL: International petroleum giant Chevron yesterday  announced that it will exchange its 17.5 percent holding in Woodside Petroleum's Browse liquefied natural gas  venture off the coast of Western Australia with rival multinational Royal Dutch Shell in a US$2 billion-plus deal.  The agreement will result in Chevron acquiring Shell's holding for two licences in the state's Carnarvon Basin and US$450 million in cash, conditional on the support of the relevant governments.

YAL: Murray Bailey, head of Chinese-backed miner Yancoal Australia said yesterday that the trading environment  for coal was poor and was expected to remain that way throughout  the rest of the year. "In the third quarter, spot prices for all metallurgical coal are weakening we are seeing limitations in the buying behaviour of the Chinese steel mills because of their high stocks and the fact that the Chinese economy has slowed in relation to net coal, iron ore and steel production," Mr Bailey 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 to 26.00. There was a solid base pattern below 26.00 and price broke out above this zone in early August. There is now a “re-test” and offers a potential low risk entry into a new uptrend with stops at 25.50 should this support zone not hold.

UGL: 11.00. Gap down and break of the key support level yesterday. This opens up a potential move to as low as 10.00.  

-Resistance

AMP: 4.35 to 4.40

ANZ:  24.00. Strong close above this level on Friday. This opens up a potential move as high as 25 to 25.50. 

BHP: 33.00. Breakout pattern in play. Attempted breakout yesterday that held this key level. A move below 29.80 could open up increased momentum to the downside and a potential failed breakout.

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

ILU: 10.65. Failed breakout above 10.65 yesterday and bearish closing candle.

ORG: 12.50 to 12.75

STO: 12.00

WES: 34.75 to 35.00. Bearish reversal candle yesterday out of this zone.

WPL: 35.00

ASX200 and SPI Analysis

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

This week sees a busy few days of earnings reports with around 1/3 of companies on the ASX200 reporting their results this week. Please see the corporate calendar in this report for a list of the stocks in play.

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. No doubt 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.

My SPI Range today: 4310 to 4360. Outlier levels 4290 support and 4375 resistance.

My SPI plan today: SPI futures are indicated at 4350 first thing. In yesterday’s report I was looking for one more attempted push higher and failure out of the 4340 to 4350 zone. We did see an early drive higher that stalled at 4355 but for now the bears lack conviction. I do think 4355 to 4360 will prove to be strong early resistance today. Targets for any early weakness are initially down to 4330 and then strong support comes in at 4310.

XJO Daily:

This market is certainly climbing the wall of worry and stretching the resistance area. However, 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. 

SPI 60mins:

The short term trend remains up with higher lows and higher highs. Note that there was a spillover yesterday of this upward sloping trendline and this is often indicative of climatic buying before a bearish reversal.  

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 under the 33.00 level. A trigger would be a strong candle close above the 33.00 neckline. However, yesterday’s trading was rather weak and we are yet to see confirmation. Please note that breakout patterns that fail to play out are actually signs of underlying weakness. 

WES Weekly: A setup for the resistance traders

Daily reversal candle out of the resistance zone.

AMP Daily: A setup for the swing traders

After the recent results, AMP is now trading right into solid overhead resistance which should be tough to break through on first attempt. Price also remains outside the Bollinger Bands which implies an overextenstion.

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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