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I received this email from my Nephew who is also interested in the stockmarket. I found it very informative as He has a keen insight into trading and technical analysis.So good in fact that I decided to share it with you. Please remember that this is in no way to be classified as investment advice.This is just my Nephew's opinion and nothing else is intended. G’day, Just sent an email to a friend answering some questions about current stock prices, and an investment opportunity that has landed on his desk. Nothing startling, but thought that you may like to pick out some of it for an article? ! X A friend just asked me about investing in a basket of stocks in the Australian market, so I jotted down some thoughts based primarily on Technical Analysis, coloured with a broad brush of current market Fundamentals. Click on the links to the charts below, and look at 3 month and 12 month views.
AMP http://finance.google.com/finance?q=ASX%3Aamp Personally i believe that AMP can still go down further, people are concerned about their superannuation, and there will be the older generation who may pull their funds out and move to cash, if this happens, it will reduce earnings for the company. ALL http://finance.google.com/finance?q=asx%3Aall Appears to have made a higher low (although not yet confirmed), and recent higher highs. Technically (which means looking at the graph) it will look ok if there is another higher high made in the coming months, followed by another higher low. There is no real recent Fundamental news (actual data, statistics, sales figures, etc) at all in recent weeks. A positive for the company is that gaming companies, although they can be described as ‘discretionary’ spending, usually are a defensive stock, ie: when the market is down, people still spend money on 'entertainment' to make them feel better). ASX http://finance.google.com/finance?q=asx%3Aasx Has appeared to have stopped falling, but yet to show signs of recovery (ie: need a new higher high, and a new higher low). They should do alright in the near term as the ASX makes revenue from transaction fees (and there have been HEAPS of transactions over the last couple of months, no brainer there), however going forward transaction volumes will reduce as it will take a year (give or take) for the average mum and dad investor to be game enough to put money back into the market. ANZ http://finance.google.com/finance?q=asx%3Aanz Australian banks should perform reasonably well going forward, being in much better shape than their US counterparts. No reason why this should'nt be the case for ANZ. Have made a recent higher high, but this was followed by a more recent lower low - there is still uncertainty in the market. BHP http://finance.google.com/finance?q=asx%3Abhp Still in a downtrend. Due to the US recession (not yet, but very soon) demand for commodities is slowing (but will not stop) this means that China will not need as much of what companies like BHP have to offer. Having said that, with the drop in the Australian Dollar our exports/commodities are 30% cheaper than they were a month ago. Should the Australian Reserve Bank lower interest rate even further (as is highly likely) then our exports will become even cheaper which will perhaps offset some of the reduced demand. Still too early for this one. 
BSL http://finance.google.com/finance?q=asx%3Absl Much the same as BHP. Analysts have cut their 12 month forecasts for BSL down to $8 (currently $5.80), which means that there is room for modest improvement in the share price, but not a lot. MAP http://finance.google.com/finance?q=asx%3AMAP According to the chart, still making lower lows. Going forward there will be less travel as people tighten their belts, this will have an immediate impact on their earnings. MQG http://finance.google.com/finance?q=asx%3AMQG Still in a downtrend. They are an investment bank, one of their main costs is funding/interest rates for their investment vehicles (Macq. Airports, Toll Roads, Tunnels, etc), while the Australian interest rates are coming down, they still rely heavily on international finance. Not only that, people will be looking to save money any way they can - why pay to use a toll road or a tunnel? For that matter, fuel costs are still high, and i am sure that this will have a positive effect on car pooling and public transport in the major cities. MQG have recently announced that they are selling off their margin lending business, which was a big earner for them. Event the analysts say this has further to fall. OZL http://finance.google.com/finance?q=ASX%3AOZL Still in a downtrend. Antam (Indonesian company) today announced that they may be unable to fund the proposed purchase of 66.5 million shares. If this doesn't go through, it will push the stock price down. On the other side of the coin, there is consistent demand for what OZL produces. Also refer to my comments on BHP and BSL. STO http://finance.google.com/finance?q=asx%3Asto Last month $20, today $12. Still going down. SUN http://finance.google.com/finance?q=asx%3ASUN There has been a lot of talk about take-over prospects, however they only had one offer from ANZ which they knocked back today "ANZ's offer was less than the value of Suncorp's net tangible assets, the Review reported.". Their share price has suffered because of the global crisis, but also being beaten down by insurance losses over the last 12 months. The chart is showing some signs that it may have bottomed, but too early to say for sure. WES http://finance.google.com/finance?q=asx%3Awes Last month $31, today $21. No sign of a bottom yet, according to the charts. They should perform well if they can fix the recently purchased Coles business, however they have also taken on a fair amount of debt to buy Coles. WDC http://finance.google.com/finance?q=ASX%3AWDC Principle business is shopping centres, with economies slowing down (some more than others, and WDC has significant holdings in US of A), logically, shoppers will be spending less over the coming 12 months, which will affect the rental income WDC receive. By how much, who knows. Two months ago they announced an increase of earnings by 5.5% - this is the only recent news about them. The chart does suggest that it may have bottomed, but it has not been confirmed yet. Having said all of that, I personally believe that we have a little more way to fall (not much - in Australia at least), but the turnaround will take time, mainly because we are going to be affected by overseas markets. The leader of the federal opposition said today, with what is going on in the USA "we will get wet, but we will not drown" - I agree wholeheartedly. There is also still a lot of uncertainty out there. August 12 (30 days ago) the ASX200 index was at 5,053 pts, today it is at 4,180 pts (down by 17%) and that is after today’s 5.55% ‘rally’. I don't believe that our markets will keep going down as they have been, I do believe that people's confidence is severely shaken and it will be a couple of months before anyone is really game to get back in (in a big way). It will also take a few months for the full effects to flow through to all parts of our economy: If a company performs poorly 'yesterday', they will almost surely lay off staff 'today', and in turn these people will have nothing to spend 'tomorrow'. Even with the stunning interest rate cut of 1% last week, the real estate market is not expecting this to have an effect on property sales/prices until March 2009 or later. I believe people will be battening down the hatches until after Christmas (retailers are already preparing for lower Christmas sales figures). Remember that in times like this, the market is driven much more strongly by fear, and that the market prices are a reflection of how people feel about a stock, not necessarily by what the stock/company is actually doing. If you were to ask me if I would invest in these stocks using leverage with: * a 6 month time frame, no way * a 12 month time frame, maybe and i would wait 3 months and assess before getting in * a 3 year time frame, definitely yes, and I would still wait 3 months and assess before getting in, but expect to be 'in' within 6-9 months And the main reason for this is: why pay interest costs by buying in now, why not wait until there is some upward momentum? Ok i agree you may miss out on some profits if they start going up tomorrow, but you would be saving your money on interest payments if the stocks end up going sideways for 3+ months which I think is likely, and at that time you could make a decision with much more confidence. Personally, i believe that there are opportunities out there that would be better traded by buying single companies rather than lumping 13 in together. My picks for MODERATE/STRONG gains over the next 3-12 months would be: * banks, they have been knocked down to record low Price/Earnings ratios – look at Westpac, their current dividend is 6.8% which is the same as if you deposit money into a bank account, but by owning the shares you also get the upside of any capital growth and the tax credits!! PENSIONERS TAKE NOTE!! * resources (bhp, etc), there will be a fair bit of consolidation (take-overs) in the coming months due to companies prices being knocked down, and a moderate bounce in commodities with the current low aussie dollar * 'non-discretionary' retailers (Woollies, etc) as people will continue to buy food and other ESSENTIALS - not tv's (Harvey Norman, JB Hifi), holidays and cars etc. (BTW - this is a great time to be buying a car, it is definitely a buyers market, if you don't get the discount you want, walk out the door, and they will call you back...) Yes, ‘it has hit the fan’, but now is the time to look at what is happening in the market with a cool head, and understand what it is that the masses of people are feeling/thinking(?) about what is happening, and then adjusting your trading strategy accordingly. These are incredible times, with amazing opportunities abound.... if you know ‘how’ to look. Interestingly enough, in times like these, it would appear that the poor economy is having a positive effect on people’s health.... take-aways and fast food is too expensive, so people are looking back to the grocery shelves - the healthy basics. Who would have thought. Maybe we’ll all be a little leaner, meaner, stronger and wiser after this is all over, eh?
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