Evening Wrap: ASX 200 dips on faltering mining stocks, Droneshield shot down on short seller report

The biggest news / move of the day was undoubtedly Droneshield (ASX: DRO). It rose to a new high of $2.72 at the open only to plunge over 34% to $1.79 just before it went into a trading halt. The only reason company management could offer for the wipeout was an article on a non-mainstream media site about a particular fund manager’s bearish views on the stock.

I suspect that as the stock was falling, nervous investors (ironically completely oblivious to the somewhat obscure article) sold in a panic fearing a negative company announcement must be in the offing. When they learned it was nothing of the sort – many scrambled back in after the trading halt was lifted. DRO closed at $2.02, up around 10% from its low. Quite a day!

For all the other moves (yes other stuff did happen today!)….

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 18.3 points lower at 7,999.3, 0.23% from its session high and just 0.03% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 109 to 160.

In an Evening Wrap not that long ago I noted the S&P/ASX 200 had logged some of its narrowest trading ranges in its history during the recent consolidation below 7911. We did it again today – the 22nd smallest trading range on record in percentage terms at just 0.26% (21.1 points).

Small range pullbacks like today’s are usually a good thing in a well-established uptrend. Particularly just after we’ve logged some decent gains and set new all-time highs. They speak of limited control / desire among the supply side to impact prices, and a demand side that whilst not willing to chase today – continued to hold firm on the bid side.

Low downside volatility is one of the most important hallmarks of any good, sustainable uptrend. ✅

Looking at the sector winners and sinners, there were some consistent themes as far as recent performances go. Real Estate (XRE) (+0.76%) was the best performing sector today, likely in response to continued falls in market yields.

The sector has had a tough time of it since the March 28 peak, so its good to see it pushing back towards those highs – and not solely on the power of major constituent (and solid up-trender) Goodman Group (ASX: GMG) (+1.5%).

Real Estate Investment Trusts (XPJ) sector index chart

XPJ best performers today

It fell away quickly from there in terms of sector performance to seemingly perennial sinner Materials (XMJ) (+0.93%). There were some stellar gains at the very small end, however, and I note here ChartWatch ASX Scans uptrends lists regulars Titomic (ASX: TTT), Fenix Resources (ASX: FEX), Firefly Metals (ASX: FFM), Ora Banda Mining (ASX: OBM), Catalyst Metals (ASX: CYL), Resolute Mining (ASX: RSG), Genesis Minerals (ASX: GMD), and Perseus Mining (ASX: PRU) each did well.

It was the big end of town that dragged the sector down, with moderate-to-sharp losses in key base metals, iron ore, rare earths, and lithium stocks.

The best and worst of the Materials sector today

ChartWatch

Russell 2000 Index (RUT)

The demand side appears in control

This is the first time we’ve covered the RUT in ChartWatch, but I did a deep dive on its importance to the Australian stock market here.

In that article I noted the RUT tends to be a good indicator of the true performance of US stocks compared to the mega-cap laden/influenced S&P500 and Nasdaq Composite.

If this is the case, then last night’s move to its highest close since 11 January 2022 is a welcome development. The timing is perhaps not a coincidence – it was around then that the market began to fully embrace the imminence of the Fed’s interest rate lift-off.

The RUT experienced a protracted decline from that point that would destroy around 25% of its value in the bear market that was to occur.

Today, if market expectations come to fruition, the Fed is about to embark on a rate cutting campaign that could last the better part of a year and reduce its cash rate by over 1%.

Book ends? We shall see. All I know is that the short and long term trends indicate strong demand-side control here, particularly in light of the aforementioned break to 18-month highs on some strong demand-side candles.

The old supply zone of 2112-2139 should move to demand. The next point of supply (not on screen is the 4 January 2022 peak at 2289, and above that, there’s little to the all time high at 2459 set on 8 November 2021.

As always, watch the candles. All is well while candle bodies remain white and shadows are pointing down. The opposite, i.e., black bodies and upward pointing shadows would indicate the supply side is creeping back in.

Economy

Today

• There weren't any major economic data releases in our time zone today

Later this week

Tuesday

• 22:30 USA Core Retail Sales June (+0.1% forecast vs -0.1% in May)

Wednesday

• 22:30 USA Building Permits June (1.4m forecast vs 1.4m in May)

• 23:15 USA Industrial Production June (+0.4% forecast vs +0.9% in May)

Thursday

• 11:30 AUS Employment Change & Unemployment Rate June

  • Jobs +20.2k forecast vs +39.7k in May

  • UR 4.1% forecast vs 4.0% in May

• 22:15 EUR ECB Main Financing Rate (forecast no change at 4.25%)

Friday

• 00:00 CB Leading Index June (-0.3% forecast vs -0.5% in May)

Latest News

Interesting Movers

Trading higher

• +11.1% Metals X (MLX) - No news, continued positive response to 11 July Investment in First Tin, rise is consistent with prevailing short and long term uptrends 🔎📈

• +8.3% Cettire (CTT) - Change in substantial holding (increase)

• +6.6% Fenix Resources (FEX) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.2% Electro Optic Systems (EOS) - EOS announces 92% increase in 1H 2024 revenue, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.1% Firefly Metals (FFM) - Change in substantial holding (increase), rise is consistent with prevailing short and long term uptrends 🔎📈

• +5.5% Lifestyle Communities (LIC) - Modest rebound after yesterday's Response to Media

• +5.5% Iress (IRE) - No news, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +4.7% Ora Banda Mining (OBM) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.4% Emeco (EHL) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.1% Bravura Solutions (BVS) - No news, continued positive response to yesterday's Release Date for FY24 Results and Guidance Update

Trading lower

• -22.3% Droneshield (DRO) - Response to ASX Price Query

• -10.0% Adriatic Metals (ADT) - Constitutional Court Release Update, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -8.3% Core Lithium (CXO) - June Quarterly Report and Investor Webcasts, fall is consistent with prevailing short and long term downtrends 🔎📈

• -6.3% Immutep (IMM) - No news, has been extremely volatile since 27 June Positive topline results from ph2b in head & neck cancer, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -6.2% Aussie Broadband (ABB) - No news, continued positive response to yesterday's NEWS, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -5.9% Latin Resources (LRS) - No news, fall is consistent with prevailing short and long term downtrends 🔎📈

• -5.9% Chalice Mining (CHN) - No news, fall is consistent with prevailing short and long term downtrends 🔎📈

Broker Notes

Aussie Broadband (ABB)

• Retained at neutral at E&P; Price Target: $4.00 from $4.50

• Retained at hold at Jefferies; Price Target: $3.10 from $3.75

• Retained at neutral at JP Morgan; Price Target: $3.30 from $3.35

• Downgraded to marketweight from overweight at Wilsons; Price Target: $3.32 from $4.52

Abacus Group (ABG)

• Retained at buy at Citi; Price Target: $1.35

Auckland International Airport (AIA)

• Retained at buy at Citi; Price Target: NS$9.20

Australian Unity Office Fund (AOF)

• Downgraded to accumulate from buy at Ord Minnett; Price Target: $1.37 from $1.45

Abacus Storage King (ASK)

• Retained at buy at Citi; Price Target: $1.40

Atturra (ATA)

• Retained at buy at Shaw and Partners; Price Target: $1.40

Bellevue Gold (BGL)

• Retained at hold at Argonaut Securities; Price Target: $1.90

• Retained at buy at Canaccord Genuity; Price Target: $2.20

• Retained at buy at Goldman Sachs; Price Target: $2.15 from $2.20

• Retained at outperform at Macquarie; Price Target: $2.10

• Retained at buy at UBS; Price Target: $2.25

BHP Group (BHP)

• Retained at equal-weight at Morgan Stanley; Price Target: $46.65

Biome Australia (BIO)

• Retained at buy at Bell Potter; Price Target: $0.80 from $0.73

Brickworks (BKW)

• Retained at neutral at Macquarie; Price Target: $27.30

BWP Trust (BWP)

• Retained at sell at Citi; Price Target: $3.40

Charter Hall Group (CHC)

• Retained at buy at Citi; Price Target: $13.50

Charter Hall Long Wale Reit (CLW)

• Retained at neutral at Citi; Price Target: $3.50

Computershare (CPU)

• Retained at overweight at Morgan Stanley; Price Target: $29.40 from $29.70

Charter Hall Retail Reit (CQR)

• Retained at buy at Citi; Price Target: $4.00

De Grey Mining (DEG)

• Retained at buy at UBS; Price Target: $1.80

DUG Technology (DUG)

• Initiated at buy at Ord Minnett; Price Target: $3.46

Dexus (DXS)

• Retained at neutral at Citi; Price Target: $8.20

Goodman Group (GMG)

• Retained at buy at Citi; Price Target: $40.00

Growthpoint Properties Australia (GOZ)

• Retained at buy at Citi; Price Target: $2.60

GPT Group (GPT)

• Retained at buy at Citi; Price Target: $4.90

GWA Group (GWA)

• Retained at outperform at Macquarie; Price Target: $3.10

Ikegps Group (IKE)

• Retained at buy at Bell Potter; Price Target: $0.63

Immutep (IMM)

• Retained at buy at Bell Potter; Price Target: $0.75

Ingenia Communities Group (INA)

• Retained at buy at Citi; Price Target: $5.30

James Hardie Industries (JHX)

• Retained at outperform at Macquarie; Price Target: $66.60

Lifestyle Communities (LIC)

• Retained at buy at Citi; Price Target: $17.20

Lendlease Group (LLC)

• Retained at buy at Citi; Price Target: $6.30

Liontown Resources (LTR)

• Retained at neutral at Citi; Price Target: $1.00

Mirvac Group (MGR)

• Retained at buy at Citi; Price Target: $2.10

Nanosonics (NAN)

• Retained at hold at Bell Potter; Price Target: $3.45 from $3.00

National Storage Reit (NSR)

• Retained at buy at Citi; Price Target: $2.60

Pilbara Minerals (PLS)

• Upgraded to positive from neutral at E&P; Price Target: n/a

Pioneer Credit (PNC)

• Retained at buy at Shaw and Partners; Price Target: $0.80

Pexa Group (PXA)

• Initiated at overweight at JP Morgan; Price Target: $15.00

Qualitas Real Estate Income Fund (QRI)

• Retained at buy at Citi; Price Target: $1.60

Reece (REH)

• Retained at underperform at Macquarie; Price Target: $19.40

Region Group (RGN)

• Retained at buy at Citi; Price Target: $2.60

Rio Tinto (RIO)

• Retained at overweight at Morgan Stanley; Price Target: $138.50

Reliance Worldwide Corporation (RWC)

• Retained at outperform at Macquarie; Price Target: $6.10

Scentre Group (SCG)

• Retained at neutral at Citi; Price Target: $3.10

Stockland (SGP)

• Retained at buy at Citi; Price Target: $5.10

Vicinity Centres (VCX)

• Retained at neutral at Citi; Price Target: $2.10

Scans