ALGO Buy Signal In Rio Tinto

Our ALGO engine triggered a buy signal for RIO into the ASX close yesterday at $72.70.

The “higher low” structure is referenced to the $68.60 low posted on August 12th.

Analysts have retained their buy  rating and $90.00 price target on the mining giant’s shares after it announced the sale of its stake in the Kestrel coal mine for US$2.25 billion.

RIO was added to our ASX top 100 Model portfolio last March at $61.40.

RIO Tinto

 

ETF Watch – World Ex Australia

Our Algo Engine generated a buy signal yesterday in the SPDR S&P World ex Australia ETF.

The signal was triggered at $21.63 as the stock retraced back to form a “higher low” formation. $20.50 is also a relevant price target from the high back in 2015. Investors wanting to add global portfolio exposure through one simple transaction may consider this ETF.

3 year average annual return is running at around 9%.

If investors wanted to play a US dollar recovery, they may opt for the un- hedged WXOZ ETF.

AMC Nears Resistance At $14.50

We suggested buying AMC in a blog posting on March 7th at $14.06.

Since the start of the year, AMC has been trading in a pennant formation with support in the $13.70 area and firm resistance at $14.50.

The share price traded to $14.26 today and we are looking at $14.50 as a price inflection point.

A break higher could extend to $14.80, which would offer and opportunity to sell the $15.00 calls into December.

This would allow investors to collect the September dividend of 29.85 cents, as well as 60 to 70 cents in option premium for the sold calls.

AMCOR

 

 

 

Stress Is Building In the Inter-bank Lending Market

While much of the financial media has been pointing to the threat of a trade war as the source of recent market volatility, we have also noticed rising stress in the inter-bank funding market.

As illustrated in the chart below, the LIBOR-OIS spread has spiked from 22 basis points to almost 60 basis points over the last 5 weeks.

The LIBOR-OIS spread reflects the amount of premium one bank requires from another bank to loan them money.

In simple terms, when banks start to question the financial health of other banks, the spread widens.

Rising funding costs are a headwind to global equity markets, which in turn acts to dampen bond yields; especially in the longer end of the curve.

The practical impact of this dynamic has been seen in the recent firming in some of the local interest sensitive names.

At these levels, we prefer the long side of SYD, TCL, SCG and WFD

LIBOR-OIS Spread

Sydney Airport

Transurban

Scentre Group

Westfields

SEEK – Algo buy signal

Seek has been triggered as an Algo Engine buy signal.

With a weak broader equity market backdrop, we’re in no hurry to buy today.

However, should we see Seek trade closer to $18.50 in tomorrow’s session, we’ll revisit the buy-side idea.

Keep this one on your watch list.

SEK

Caltex – watch for entry point

Caltex has sold off $6.00 in the past 4 weeks. With the stock now trading 13x earnings and 4% dividend yield, we expect to see buying interest starting to build.

There is no current Algo Engine buy signal, therefore investors will be well advised to manage the trade by scaling into the purchase.

CTX