Article / 05 February 2015 at 23:26 GMT

Today's Trade: A move on AMP, short-term AUDUSD foray

Trading Desk / Saxo Capital Markets
Australia
  • S&P/ASX 200 Index futures contract rose 0.6% to 5,787 after oil price rise
  • Violence in Libya and the Chinese move fuel a buy-up in oil
  • Gold futures remain unchanged; iron ore down 1.5%

By Saxo Capital Makets (Australia)

A choppy session took place in Europe overnight with volatility around unwinding of earlier moves from the ECB’s decision to restrict Greek banks access to liquidity. The ECB will no longer accept collateral offered by Greek banks in return for financing, leaving them dependant on the ECB’s emergency liquidity program.

  • The US markets were strong on two fronts. The first being the rise in oil price with Brent up 4%. The second came following the announcement of Pfizer’s $17 billion merger plans.
  • The night finished with the Dow Jones, S&P 500 and Nasdaq all up 0.9%, 0.8% and 0.7% to 17,836, 2,057 and 4,752 respectively. The UK FTSE was also up 0.1% to 6,866 where both the Stoxx50 and DAX where down 0.2% and 0.1% to 3,409 and 10,905 repectively.

Local Markets

  • S&P/ASX 200 Index futures contract rose 0.6% to 5,787 following the uplift in the oil price and the announced $17bn merger from Pfizer
  • Bank of New York Australia ADR Index is up 1.8% with BHP Billiton ADR +1.6% and Rio Tinto ADR +2.4%
  • Gold futures remain little unchanged at $1,264. Stocks to watch: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Iron ore was down 1.5% to US$61.64/tonne with poor fundamentals causing little buying pressure. Fortescue Metals (FMG) has had a major US hedge fund make a 5% purchase of total stock. A falling Iron Ore price mixed with speculation of a potential take-over makes FMG a tricky trade. Stocks to watch: BHP, RIO, AGO, FMG, BCI
  • Crude Oil rose after increasing violence in Libya caused output to fall. The Chinese central bank reducing its banks capital requirements has alleviated some of the supply and demand concerns, fuelling a buy up of oil. Stocks to watch: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • JB Hi-Fi (JBH): Real chance our second profit target of AUD16.90 (+6.9% profit) will be hit today. Be aware of the days movements. Total return if 50/50 first and second profit target were taken generated a 5.65% return in 6 trading days.


xxx
 The Aussie market picked up on the US lead, based on a rising oil price. Photo: iStock
 
Data points (Asia)

Today: Australia. RBA Monetary Policy Statement (11:30am)

One New Trade

AMP Limited (Ticker: AMP:xasx), Australia’s largest independent wealth management company yesterday broke its six-year trading range to the upside forming a very bullish signal. This is a significant move as three attempts in the past have failed to break the AUD5.95 level. Yesterday's trading session saw AMP gap up on open and trade up to a five-year high. We view this is a valid breakout and have a price target of AUD8 in the medium to long term.

Todays' Trade: Buy at market. First profit target is at AUD6.49 (+7.2%) and second profit target at 7.12 (+17.7%). The third and final profit target is at 8.00 (+32%). Stop loss set at AUD5.79 (- 4.3%).

AMP monthly chart

Chart
Source: Saxo Bank

ticket
 




 
























Breakouts of trading ranges are of the most respected price movements by technical traders. Trading ranges are considered periods of energy accumulation and when the price finally breaks this range, the accumulated energy is unleashed resulting in a significant price movement in the direction of the break.

Current Trades:

  • (30/1) JB Hi-FI (Ticker: JBH:xasx): Entered long position on January 30 at AUD16.70 as stock has been forming a BULLISH WEDGE leading into their reporting. First profit target around AUD17.47 (+4.4%) and second profit target at about AUD17.90 (+6.9%). Stop loss trailed to entry price of AUD16.70
  • (22/1) Bluescope Steel: BSL is heading back up to its resistance level of AUD5.37 where there has been quite a lot of noise since January 2014. Should it fail to push higher above this level, a head and shoulders pattern will be completed where a quick and swift sell off is expected. Sell Limit: from AUD5.33 to about AUD5.37 with a stop loss above AUD5.62 (Loss: 5.4%). First profit target: AUD4.70 [December 14 low] (Profit: 11.8%), Second profit Final Target: AUD4.04 (Profit: 24%)
  • (21/1) Accumulation of the big four banks. Buying is coming back in the past couple of days and it appears as if our divident yielding banks are back on investor radars: ANZ, CBA, NAB, WBC

NOTE: Myer (Ticker: MYR:xasx): Yesterday our second and last profit target was reached on Myer Holdings where we were able to unwind our entire long position at a 9.3% return. For those that wish to hold onto their long positions, the next level to watch out for is AUD1.87.

Broker downgrades/upgrades
     
  • Boral (BLD): Cut to neutral vs overweight at JPMorgan
  • Brambles (BXB): Cut to hold vs add at CIMB
  • Charter Hall Retail (CQR): Cut to underweight vs neutral at Commonwealth Bank
  • Fletcher Building (FBU): Cut to underweight vs neutral at JPMorgan
  • Monadelphous (MND): Cut to hold vs buy at Morningstar
  • Qantas (QAN): Cut to sell vs hold at Morningstar
  • REA Group (REA): Raised to buy vs underperform at BBY; cut to neutral vs buy at UBS; cut to neutral vs outperform at Credit Suisse
  • Seven West (SWM): Cut to neutral vs buy at Goldman Sachs
  • Stockland (SGP): Raised to overweight vs neutral at Commonwealth Bank
  • Tabcorp (TAH): Cut to neutral vs outperform at Credit Suisse; shares halted until as late as Feb. 10 for equity raising
  • Toll (TOL): Cut to reduce vs hold at CIMB

AUDUSD

Yesterday’s trade idea on the AUDUSD was a profitable trade. While the stop loss was not touched, the profit target was achieved at 0.7820. The AUD had yet another relatively narrow ranging day overnight ahead of today’s RBA monetary policy statement. We do not expect any additional surprises in this statement and the rapid rebound in the price action from the recent bottom of 0.7625 after the RBA rate cut, signals that we would see further upside momentum as now the AUDUSD is forming an interim uptrend while the downtrend channel looks to be broken.

AUDUSD is expected to trade around 0.7800 but we believe it would test the key resistance level 0.7852 today and a break out of this level is predicted.

Buy AUDUSD

Entry: Market

Target: 0.7870

Stop loss:
0.7771
AUDUSD DO
 
ASX/S&P200

On the back of the US market rally, we expect the ASXSP200 to continue its solid upward momentum although it is trading in the overbought area. The uptrend channel is still intact which restricted some further upward move overnight. We will not be surprised if we witness some profit taking during today’s trading session but any dips will provide some buying opportunities (Scenario B).

Scenario A:  Sell ASX/S&P200

Entry:
limit 5,820

Target:
5,832

Stop loss: 5,769

Scenario B: Buy ASX/S&P200

Entry:
limit 5,767

Target:
5,832

Stop loss: 5,750

SP200 DO
 Media sources: AFR, SMH, CNBC, BBG, WSJ


-- Edited by Adam Courtenay

Today's Trade is compiled by the Sydney trading desk at
Saxo Capital Markets




Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail