Evening Wrap: ASX 200 edges higher as energy majors, uranium rebound

It was a seesaw session for the S&P/ASX 200, albeit within a tiny trading range, as investors digested November's gain and contemplated what's coming next.

We know this is typically a good time of the year for stocks, but there are still risks on the horizon as higher interest rates gnaw at economic growth. It wasn't that long ago stock prices were tumbling...

It feels we're at a crossroad here, so which way do we go? Let's dive in!

Markets

ASX 200 Session Chart

ASX 200 edged higher, but it was better than it looked (Source: Market Index)

The S&P/ASX200 (XJO) finished 9 points higher at 7058.4, 0.2% from its high and 0.1% from its low. Small trading ranges such as this (and Friday's) after a nice rally hint at a little bit of soul searching from investors. They don't really want to pay much higher after the recent run-up, but they don't want to be out of the market either!

So here we are, caught in a swirling little eddy, waiting to break free and find the next trend. The good news is, in my experience, small pullbacks after big moves up are usually a positive sign.

Generally, the demand side is waiting to see if they can snatch a pullback, to gain a small discount against the recent run up. The supply side clearly isn't feeling the need to be in the market, and this hints they're happy to remain invested rather than take advantage of newly higher prices.

Now we just need a spark! Another titbit of good news to convince the demand side the pullback they're hoping for isn’t coming - to motivate them to jump in now or risk paying much higher prices in the future!

With respect to best and worst sectors, it was the exact opposite of Friday. Today we saw Energy finally bounce a little, while gold companies pared back. In between these, there was very little movement of note.

Energy companies got a boost from a nice rally in crude oil prices on Friday as West Texas Intermediate rallied 4% to US$76/brl. In Asian trade today, crude is pushing higher again to around $76.65 at the time of writing.

Rising today, oil & gas, coal, and uranium companies in a stronger ASX Energy sector

Crude prices are rising because traders are backing out of short positions ahead of OPEC's next meeting on November 26. The expectation is the Saudi's will push for another round of cuts to add to those introduced earlier this year in an attempt to shore up prices.

West Texas Intermediate Crude Oil ($US/barrel)

Looking at the chart for West Texas Crude Oil, we can see why ASX energy companies have suffered this month. Before today's rally, the S&P/ASX Energy Sector was down 7% since the start of November, and a whopping 14.8% since its 10 August peak.

The market has reacted to a flip from steady drawdowns in crude inventories until the end of August, compared to an inventory build-up through September and October. Initial fears crude prices could spike in the wake of the Middle East conflict were soon dispelled, and generally weaker global economic growth data has undermined confidence in energy markets.

Recent rallies in stocks on the back of a pullback in higher long term bond yields has failed to spark a rally in crude, at least yet. Friday could have marked the start, however, and the white candle the 4% rally created has my attention...

But, my model is short term bearish, long term neutral. The current 2-day bounce is only recouping Thursday's decline, and price action remains lower peaks and lower troughs indicating sell the rally, not buy the dip.

The most logical place to sell the current rally is the US$79-$80 confluence of my trend ribbons and the 14 November high. If you're an investor in ASX energy companies, that's the key point to watch. A break of that level is a major positive, whereas a failure could spell a resumption of losses for Woodside and Co.

Economy

There weren't any major data releases today.

What to watch out for...

All ears will be tuned to RBA Governor Michelle Bullock's speech at 10am AEDT tomorrow ahead of the 11:30am release of the Reserve Bank of Australia's Monetary Policy Meeting Minutes for November.

Latest news

Interesting news and movers

Trading higher

• +70.0% Viridis Mining and Minerals (VMM) - Major Ionic Clay Rare Earth Discoveries at Colossus

• +24.3% TG Metals (TG6) - Drilling Update at the Burmeister Lithium Discovery

• +8.4% 4DMEDICAL (4DX) - Receives U.S. FDA clearance for CT LVAS

• +5.3% Alligator Energy (AGE) - Noosa Mining Conference Presentation - November 2023

• +4.1% MMA Offshore (MRM) - Award of Decommissioning Services Contract

• +3.4% Karoon Energy (KAR) - Completion of Placement and Institutional Component

• +3.1% Paladin Energy (PDN) - Uranium price hits new 15 year highs

• +2.5% Noble Helium (NHE) - Investor Presentation - Noosa Mining Conference

• +2.2% Deep Yellow (DYL) - Uranium price hits new 15 year highs

Trading lower

• -31.7% Peninsula Energy (PEN) - $60M Equity Raise to Fund Restart of Production at Lance

• -23.7% Invictus Energy (IVZ) - Hydrocarbon gas recovered & evaluation program forward plan

• -3.7% Impedimed (IPD) - Announces leadership and Board changes

• -8.5% Accent Group (AX1) - Broker rating and target downgrades following 17 Nov AGM and trading update

Broker notes

• ALS (ALQ) retained at neutral at UBS; Price Target: $13.00 from $12.10

• Altium (ALU) upgraded to outperform from neutral at Macquarie; Price Target: $49.70 from $39.10

• Accent Group (AX1):

  • Downgraded to market-weight from overweight at Wilsons; Price Target: $1.90 from $2.20

  • Downgraded to neutral from buy at Citi; Price Target: $1.93 from $2.12

  • Retained at sell at UBS; Price Target: $1.85 from $2.00

• Catalyst Metals (CYL) initiated speculative buy at Morgans; Price Target: $0.90

• Domino's Pizza Enterprises (DMP) upgraded to outperform from neutral at Macquarie; Price Target: $58.00 from $54.00

• Nine Entertainment Co. (NEC) retained at buy at Goldman Sachs; Price Target: $2.30 from $2.40

• Neuren Pharmaceuticals (NEU) retained at buy at Bell Potter; Price Target: $17.50

• Propel Funeral Partners (PFP) initiated outperform at Macquarie; Price Target: $5.95

• Steadfast Group (SDF) upgraded to outperform from neutral at Macquarie; Price Target: $5.90 from $6.40

• Seven West Media (SWM) retained at sell at Goldman Sachs; Price Target: $0.30 from $0.35

• Treasury Wine Estates (TWE) retained at Neutral at Citi; Price Target: $11.80 from $12.87

Scans