Evening Wrap: ASX 200 books 5-day winning streak + AGL rallies 50% in three months

The ASX rallied on Friday, closed at best levels and close to a 1-month high, buying was broad-based with all sectors (except healthcare) trading at least 0.55% higher, the Bank of Japan kept interest rates at negative 0.1%, AGL expects FY24 profits to double.

Let's dive in.

ASX 200 Session Chart

ASX 200 rallies intraday and closes at best levels (Source: Market Index)

Markets

The market has been grinding higher in a rather unconvincing way in the past few sessions but things really started to turn up today thanks to a strong lead from Wall Street and firmer commodity prices. The ASX 200 is now on a five day winning streak, up 2.25%. The problem is that US markets are rather extended and indicators such as CNN's Fear & Greed Index are currently sitting at levels of 'Extreme Greed'. Let's see if we can see some follow through strength for local markets but if a pullback takes place - let's see if its the constructive kind of pullback.

Economy

The Bank of Japan maintained its ultra-easy monetary policy, with short-term rates at -0.1% plus a 0% cap on its 10-year bond yield.

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Market Insights

Talking Technicals: ASX 200

The ASX 200 is rallying into a key downward trendline. So what will it be?

• We break through and it becomes a lockout rally (aka it runs too hard and makes it difficult for investors to get in)

• It breaks through but pulls back to re-test the trendline

• It rejects the trendline but the pullback is shallow (3-5%)

• It rejects the trendline and whips back to previous lows

ASX 200 daily chart (Source: TradingView)

AGL: Up 50% in three months

When AGL posted its half-year FY23 earnings on 9 February, the stock tumbled 10.8%. The result flagged a 55% decline in underlying NPAT to $87 million, which was materially below consensus forecasts.

While most brokers trimmed their share price targets, they remained bullish with the view that the stock is cheap and poised to deliver growth in FY24. Post half-year results, 50% of sell-side ratings (14 ratings) were Buy rated and the average target price was $8.11.

But it wasn't just brokers that were bullish. So were AGL directors. They went on a buying spree after the February results.

Now here we are. AGL guided to FY23 profits of $255 million to $285 million (previous guidance was between $200 million and $280 million). As well as FY24 profit expectations of $580 million to $780 million thanks to sustained periods of higher wholesale electricity pricing and improved plant availability.

AGL 12-month price chart (Source: Market Index)

Interesting news and movers

Trading higher

• +25.0% Jervois (JRV) – $15m funding agreement from US DoD

• +9.7% AGL Energy (AGL) – Guidance

• +8.0% Kogan (KGN) 

• +7.8% Reece Pharma (RCE) – 5m block trade at 53 cents pre-market

• +6.7% De Grey Mining (DEG) – Responds to media reports re DFS

• +4.8% Australian Unity Office (AOF) – Q4 dividend guidance

• +2.6% Xero (XRO)

• Gold sector move: Bellevue Gold (+7.8%), Gold Road (+4.2%), Northern Star (+3.8%), Evolution Mining (+2.1%)

• Coal sector move: Whitehaven Coal (+8.3%), Stanmore (+7.8%), Terracom (+5.7%), Yancoal (+3.6%), Coronado (+3.5%)

• Lithium sector move: Winsome (+14.8%), Leo Lithium (+9.4%), Patriot Battery Metals (+7.7%), Pilbara Minerals (+4.(%), Core Lithium (+4.0%)

Trading lower

• -13.5% DGL (DGL) – Downgraded by Morgans

• -9.1% Australian Ethical (AEF) – Pullback after up 19% in prev three

• -2.8% Johns Lyng Group (JLG) – Downgraded at E&P

Broker notes

Broker notes are taking a break today.

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