ASX Equity Morning Report 6/09/2012

Overnight Market Snaphot

European markets opened lower, following the lead of weak trading in Asia. Initially it looked like markets were set to break the low end of the range but a Bloomberg TV report led to a strong bounce and a 100pip rally in the EUR. The report indicated the European Central Bank bond purchase program is said to pledge unlimited, sterilized buying of bonds (Bloomberg). However, the exuberance was short-lived as European Central Bank officials declined to comment, and reports out of Germany suggested Chancellor Angela Merkel would only support the program in the near-term.  US Equities spent the majority of the session chopping around the unchanged line. 

The markets appear to be in waiting mode ahead of the ECB meeting on Thursday.

From a technical standpoint, the low end of the recent range were tested and held once again overnight at 1397. This level continues to be a marker going forth. I thought that the inability to breakdown recently was indicative of a potential move higher but clearly price action is still lethargic. The technical backdrop continues to deteriorate, but only confirmed breaks now below 1395 would confirm a possible pullback and deeper correction.

Emini S&P500 60mins:

Price tested the low end of the range at 1397 again overnight and held. This level continues to be met with strong buying but how long can this last for? The more obvious a level becomes and the more times it gets tested, the more prone it becomes to a breakdown. Breakout traders need to see strong breaks above 1410 for a target into the previous highs at 1425.  

S&P500 Emini Key Levels:

Support Levels: 1395, 1350

Resistance Levels: 1410, 1420/1425

OZ Stockwatch

Eco Calendar

11.30am            AUS     AUG Employment.  Est. jobs +5K; jobless rate 5.3%.

Corp Calendar

LLC:                 Ex-Div

NWS:               Ex Div

MAH:                Ex Div

SEK:                Ex Div

News:

LYC:  Rare earths producer Lynas Corporation last night announced that its controversial processing facility had secured a two-year operating licence from the Malaysian government.  The plant was subject to much criticism, with Malaysian community groups concerned about the health impacts of the site.  Nick Curtis, executive chairman of Lynas, downplayed their fears by saying that "the issuance of the licence is after a vigorous, diligent and proper examination of our facility".

FMG: the company is believed to have made an international conference call with Asian-Pacific bankers in a bid to placate their concerns and convince them to participate in a syndicate that would issue a A$1.5 billion loan to the iron ore producer.  The move comes after shares in Fortescue reached a three-year low and closed 8.5 percent lower at A$3.12, following the group's announcement that it would postpone its expansion project in Western Australia and attempt to reduce its capital expenditure by 25 percent (Australian).

QAN: The Company has sealed an alliance with Emirates in which it will replace Singapore with Dubai as a stopover to London in a bid to shore up the future of its loss making international business. Negotiations over the deal continued last night and it is understood the most likely outcome will be the announcement of a joint venture style alliance rather than a lesser code share (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. 

-Price/Vol scan and Bullish price action: AGO, MML, NCM,

-Price/Vol scan and Bearish price action: ALQ, ANZ, ARI, BKN, DOW, FMG, MAH, MIN, WOW

 

LYC will obviously be a major focus today given the news overnight that it has been granted a TOL license. There is a large short interest in this stock and this could certainly fuel a rapid rise higher. From a technical perspective, I had potential resistance at 80c but more importantly up to 90c zone. In the situations, the stock is going to rally as high as the shorts need to so be wary of attaching to much value to these levels

ASX200 and SPI Analysis

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

My SPI Range today: 4250 to 4310. Outlier level 4320.

My SPI plan today: SPI futures closed at 4295 this morning and thus a gap up of around 10points. Fair Value is now only -2 therefore the XJO is indicated at 4297 approximately first thing. 

Yesterday we saw bearish price action right off the open breaking through my 90 level. I said, “Breakdowns of this (4290) open up a move into as low as 4260 possibly”. This played out. Key short term resistance will be 4295 to 4300 first thing and I am looking for early weakness out of this zone given the downtrend and breakdown yesterday. Short traders looking to get into this downtrend should look to this area early for potential low risk short trades, stops above 4305 to 4310. Any breakout above this zone opens up a potential move to 4320. On the downside, the 60 level proved to be a key turning point yesterday and this should be the first target for any weakness once more. I had 4250 to 4260 as strong support and those who have been patiently waiting to get in this uptrend could start building into this area. Please see the Daily chart below.

XJO Daily:

A confluence of support coming in at 4250 to 4260 in the short term. This is the 200 day moving average, the 38.2 Fibonacci level off the recent low, an upward sloping trendline, as well as a grouping of upward sloping moving averages. This should be a formidable dip buying zone for those who have been looking to get into the uptrend. 

SPI 15mins:

This is the short term resistance zone coming into 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.

BKN Daily: A breakdown trade

Price has very quickly hit the first target level. This trade idea has played out very quickly

FMG Daily: Approaching target zone

I showed this chart yesterday. FMG has not put in a meaningful bullish reversal candle yet. The 3.00 level looks to be a potential target. 

NCM Daily: A setup for the trend follower

Price has now pulled back into strong support and the upward trend. Yesterday there was a bullish reversal candle despite the weak market. A stock that outperforms a weak market like this is a sign of underlying strength. 

WOW Daily: Climatic reversal pattern

Now right at the top end of the range and has shown consecutive bearish reversal candles. 

AUDUSD
The Australian dollar fell against most of its major counterparts, reaching its lowest level versus
the U.S. dollar in more than seven weeks, as economic growth in the nation slowed more than forecast in the second quarter.  The Australian dollar lost 0.3 percent to $1.0191 yesterday
in New York after earlier touching $1.0167, the lowest since July 13. Interestingly, despite a 100pip rally in the EURO, the Australian dollar failed to catch a bid. 

Key event will be the unemployment figures today at 11.30am Sydney time. 

From a technical standpoint, the analysis and outlook I have provided here continues to play out. AUD remains in a short term downtrend and has triggered a short term Head and Shoulders topping pattern. However, no doubt we are entering into a solid support zone and the first target for this move. I am also seeing increasing signs of bearish sentiment after an almost 400pip fall from the high! Thus, those traders with open short positions should be looking to tighten up risk into here. There is no signal yet of an imminent bounce but certainly the trend is beginning to look oversold in the short term.

AUDUSD Daily:
Price is now entering the Target zone and strong support

AUDUSD 60mins:
The short term trend remains down but no doubt it is beginning to look oversold in the short term. 

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 lives 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