daytrades april 11 pre-market, page-3

Aksier's Weekly Update:

The price of precious metals, base metals and WTI [oil] are on the rise again but it is important to remember that they are rising whilst the US dollar is falling quite sharply [see USD index chart below], so in AUD terms they may not actually be rising at all.

Take gold for example; at the height of the Japanese crisis on the 17th of March it was trading around $1,387 per ounce when the AUD was at 0.9758 to the USD, or AUD $1,421. On Friday night it was at $1475 per ounce but the AUD is now at $1.0562 which places gold at $ 1396 per ounce or a fall in aussie dollar terms of 1.8% over the period. Copper is a similar story with the red metal at 415.35/lb during the recent crisis or 425.62/lb in AUD terms. Now it is at 450.78/lb, but in aussie dollars that equates to 426.79/lb or a rise of only 0.3% in the AUD price.

Oil and silver are the stand out performers. Over the same period from the 17th of March until the 7th of April oil is up by 7.4% and silver is up by 9.7% in aussie dollars. This is after taking into account the devaluation of the USD.

The point I am making here is that it is important to look at the performance of the underlying commodity in AUD terms before deciding whether the sector is likely to outperform the general market on the ASX. Undertaking this analysis will help to determine which sub sectors are likely to attract most interest in the market.

The Scorecard from Friday / The Past Week
Markets
XJO 4,940.6 points, +32.5 points, Up 0.7% / +3.4 points, Up 1.6%
DJIA 12,380.1 points, -29.4 points, Down 0.2% / +3.4 points, Up 0.0%
SPX 1,328.2 points, -5.3 Points, Down 0.4% / -4.2 points, Down 0.3%
NASDAQ 2,780.4, -15.7 points, Down 0.6% / -9.2 points, Down 0.3%
FTSE 6,055.8 points, +48.4 points, Up 0.8% / +45.9 points, Up 0.8%
DAX 7,217.0 points, +38.2 points, Up 0.5% / +37.2 points, Up 0.5%
Hangseng HSI 24,396.1 points +114.3 points, Up 0.5% / +594.2 points, Up 2.5%
Nikkei 9,768.1 points +177.2 points, Up 1.9% / +59.7 points, Up 0.6%
Shanghai 3,030.1 points +22.2 points, Up 0.7% / +62.7 points, Up 2.1%

Key Commodities
Gold +$16.60 to $1,475.50, Flat / +$1475.5 +47.10, Up 3.3%
Silver +$1.29 to $40.94, Up 3.3 / +$3.14, Up 8.3%
Oil USD +$2.67 to $113.05, Up 2.4% / +$4.66, Up 4.3%
Copper USD +$0.09/lb to $4.50, Up 2.0% / +$0.24, Up 5.6%


Market Direction XJO: The The recent run on the ASX has been outstanding with the index firmly back within the trading wedge which began mid last year. Unless overseas markets falter the XJO appears set to head towards the top of the wedge at around 5,050 points in the near term. The only concerns are that the market appears to be overbought on the slow stochastic and the volume has been declining in recent sessions even though the index has still been rising. This could be a sign that the sharp rally after the events in Japan is losing steam.



The USD has broken support and looks to be headed lower in the near term. The resolution to the budget crisis may see some support for the USD in trading today but this is unlikely to last for too long. QE1 and QE@ appear to be definitely taking their toll on the strength of the currency as more and more goes into circulation around the globe. Where it will stop is hard to answer, however if a QE3 is introduced then I expect the long term devaluation relative to other currencies, including the Australian Dollar, will continue for some time yet.


Market Direction DJIA: Although the DOW had a very small gain for the week, if the decline in the USD is taken into account then the price of US share fell by 1.1% fopr the week against a basket of currencies which make up the USD index. Looking at the chart the target in the short term is the top of the trading channel at about 12,600 points. Another possible scenario is that a double top is playing out (I think this is more likely) which would be quite bearish for stocks in the short to medium term. The next few trading sessions will be important in deciding whether there is more upside left in this rally or if a high for 2011 has occurred in US stocks.



Economic Data:
The big number this week will be retail sales data coming out of the US. Gas [petrol] prices in the US began to rise sharply in the US in mid February. After a brief respite prices again started to climb sharply from mid March so it will be interesting to see whether rising gas prices have had an impact on retail sales and consumer confidence levels when this weeks data is released.

GBP CPI y/y - Tuesday 6:30pm
EUR German ZEW Economic Sentiment - Tuesday 7:00pm
USD Trade Balance - Tuesday 10:30pm
GBP Claim Count Change - Wednesday 6:30pm
USD Core Retail Sales m/m - Wednesday 10:30pm
USD Retail Sales - Wednesday 10:30pm
AUD Gov Stevens Speaks in New York - Thursday 3:00am
USD PPI m/m - Thursday 10:30pm
USD Unemployment Claims - Thursday 10:30pm
ALL G7 Meetings - Friday
CNY CPI y/y - 12:00pm Friday
CNY GDP q/y - 12:00pm Friday
USD Core CPI m/m - 10:30pm Friday
USD TIC Long Term Purchases - 11:00pm Friday
USD Prelim UoM Consumer Sentiment 11:55pm


Company Reporting Season:

Well earnings season kicks off again this week with Alcoa starting proceedings. The market has priced in an expectation of good performances for the upcoming reporting season so if results disappoint it will certainly add to volatility in the markets.

Monday: Alcoa Inc
Tuesday:
Wednesday: Bank of Queensland Ltd, JP Morgan Chase & Co,
Thursday: Bank of Ireland, Google Inc
Friday: Bank of America Corp, Charles Schwab Corp, Mattel Inc


Stocks To Watch



African Energy Resources Ltd: AFR The company is expected to release it's initial inferred JORC coal resource at the Sese Project in late April. I expect the level of interest in AFR to increase markedly from now on. The decision by the government to review the development strategy for the countries coal assets in March has added some uncertainty to the stock however the all granted prospecting licences are unaffected, including that on which Sese is located. News Due: The initial inferred JORC resource at the company's Sese Coal Project in Botswana. Price Target: Tight Bollinger Bands are signaling general agreement on the current valuation of the company's shares. Generally this doesn't usually last and a breakout up or down is increasingly likely. If the Sese resource is seen as a positive then the first target is 75 cents followed by a test of the trend line around 83 cents. Disclosure: No Stock Held



Empire Oil & Gas NL: HOG Empires share price has been impacted heavily by the exercising of options and sale of shares by its directors. During the time since the 3Y was announced the shares have fallen by a quarter from around 4 cents to around 3 cents. On Friday the shares started to move up again on increasing volume. The 2D seismic survey being flown over the Perth Basin which started on April the 1st could lead to the generation of some more attractive drilling targets for the company. I also expect more details to be released soon on the development plans for the Ginginwest-1 and Red Gully-1 discoveries. News Due: Results from the Garibaldi seismic survey over the Perth Basin. Further details of development plans for the Perth Basin field including the GinginWest-1 and Red Gully-1 wells. Price Target: Friday was the most positive trading day in EGO's shares for weeks. The price started to rise again on reasonable volume, although more volume is needed to sustain a move back to 4 cents. First targets are resistance levels at 3.5 and 3.7 cents. Disclosure: Holding EGO



Hawkley Oil and Gas Limited: HOG On the 22nd of March the company released an update with regards to production at the Sorochynska well in Ukraine. The well is now producing through an 8mm choke at a rate of 7.5mmcf/d and 300 barrels of condensate. The choke size is expected to be increased again when the gas plant is running at optimum levels with a previously stated production target of 10mmcfg/d and 350 barrels of condensate. After the ramp up phase is complete the company expects HOG to be generating revenues of $40m per year with the potential to at least double this with a new well into the same structure. The well is expected to produce for 8-9 years before any significant decline in production rates. NOPAT rates of 38-45% are the norm in Ukraine. The company is likely to report a revised upgrade to the reserves at the field any day. If the increase in reserves is significant then the structure should be able to support an additional one or two production wells. I expect Hawkley will soon begin attracting interest from institutional investors as the income stream from the Sorochynska well is established. News Due: Ramp up to full production from the Sorochynska well. Updated reserve statement for the Sorochynska license area. Outline of plans to drill another well to increase production. Price Target: In recent weeks the price of HOG shares has been trending down in line with a developing wedge. The first target is for a move to 45 cents to be followed by a test 0f the 50 cent area however, if HOG breaks out of the down trending wedge, then based on a measured move the target is in the high 70's. Disclosure: Holding HOG



Southern Cross Goldfields Ltd: SXG SXG already has significant gold resources (436,000 ounces) defined at its portfolio of projects located in the Southern Cross / Marvel Loch Area of WA. The company has an EV of about $20 per ounce so there appears to be plenty of upside in the near future. Recent infill drilling at Dolly Pot and Dugite came up with some great mineralization including 25m @ 3.3g/t Au from 23m and 11m @ 4.6g/t Au from 4m (an updated resource estimate is awaited). With grades like these and being so close to the surface, the company expects production costs to be in the range of $750-$800 per ounce. The company currently has JORC defined resources of 436K ounces of gold and is planning a feasibility study (to be completed by mid 2011) to evaluate the development of a 400,000 tonnes per annum processing facility at Marda which would produce around 25,000 ounces per year from mid 2012. News Due: Updated mineral resource estimates for the Dolly Pot and Dugite deposits. Drilling results from the Golden Orb deposit which currently contains 71,000oz of gold. Price Target: There is resistance at 8 cents and 8.3 cents however the stock has a history of price spikes with three spike above 10 cents since early February so higher prices are possible on good news. Disclosure: No Stock Held



Good Luck this week.