Evening Wrap: ASX 200 logs another solid gain on takeover rumours in health and industrials, gold stocks slump again

The Australian stock market logged its second consecutive gain as markets globally ratcheted back some of the negativity baked in last week due to Middle East tensions and interest rate, well...um, tensions!

Not one, but two potential major takeover rumours did the rounds today, with Wesfarmers (WES) potentially aiming at Ramsay Health Care (RHC), and Seven Group Holdings (SVW) potentially aiming at Cleanaway Waste Management (CWY).

Gold stocks tanked. It was brutal. Gold prices have pulled back, but the technicals suggest something far more sinister may be going on. As usual we've got all the info you need on everything that happened in today's trade, so...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 34.3 points higher at 7,683.5, 0.46% from its session low and just 0.15% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 158 to 110.

The Information Technology (XIJ) (+1.7%) sector was the best performing sector today, likely in response to a bounce in US tech stocks in New York Monday, but also on the back of a small pullback in benchmark bond yields. The latter possibly also helped sentiment towards Financials (XFJ) (+1.1%), and Real Estate Investment Trusts (XPJ) (+0.7%) today.

Also doing well was the Health Care (XHJ) (+1.2%) which got a boost from an article in The Australian today [paywall] suggesting that Wesfarmers (ASX: WES) (-0.56%) is considering a takeover bid for Ramsay Health Care (ASX: RHC) (+2.9%).

No announcements today from either company, but if the deal were to go ahead, it would be the biggest on-market takeover involving two ASX-listed companies since the $15 billion merger between TPG Telecom (ASX: TPG) and Vodafone Hutchison in 2020.

Doing it tough today was the Gold (XGD) (-3.4%) sub-index. I'm sure you know by now that the gold price pulled back overnight, but what you might not know is how precarious the technical picture is. Good news, you can read all about it in ChartWatch below!

Gold stocks were just plain yuk today 😝

ChartWatch

Gold Futures COMEX

Gold is beginning to lose some of its shine

In my last update on Gold Futures in last Monday’s Evening Wrap, I pointed out the significant blow off candle on 12 April (it’s the one with the long upward pointing shadow marking the high of 2448.8 – and on a big spike in volume).

In short, that candle didn’t auger well for continued gains in gold, but I suggested waiting for confirmation before calling that the top is in, in the form of “a long black bodied candle, or another long upper shadow”.

I put to you the candles on 19 and 22 April pretty much check the boxes in this regard.

The short term uptrend ribbon is so far doing it’s job of providing dynamic demand. Below it, and below the 2585 point of demand, I suggest the short term uptrend in gold is over.

On the other hand, if gold can find some excess demand within the short term uptrend ribbon, it might be able to keep the short term trend intact. This would manifest itself in the form of white candles / downward pointing shadows.

Until such price action is observed, and until a return to rising peaks and rising troughs, I expect the topping pattern is likely to continue to play out.

S&P/ASX 200 Utilities Sector Index (XUJ)

The best looking ASX sector chart right now

In the last few Evening Updates, we've noted that the Utilities sector has found itself at or near the top of the sector performance tables. With another robust performance today, I thought I'd take a closer look at one of the key stocks which drives this performance, Origin Energy (ORG).

Origin Energy (ASX: ORG)

A great example of a continuation setup

This is what I call a "continuation setup", that is, I can see:

• ✅ Long term uptrend

• ✅ Short term uptrend

• ✅ Good price action

• ✅ Predominantly demand-side candles

This chart is a picture of demand-side control. It smacks of fund managers with pervasive programmed buy orders, regardless of what the broader market is doing, and who are buying the dip if there is one.

I suggest that as long as ORG continues to close above the short term trend ribbon, the short term uptrend is in place.

Zooming out to the weekly chart (not shown), the only historical point of supply of any significance I could find is the July 2018 major peak at $10.27. It’s a bit old as far as I’m concerned, but we could see some nagging supply up there again.

Economy

Today

• AUS Judo Bank Flash Manufacturing PMI April (47.3 March)

  • Reading: 49.9. A value below 50 indicates contraction in activity in the sector, so manufacturing in Australia contracted very slightly, and by considerably less than the previous month

• AUS Judo Bank Flash Services PMI April (54.4 March)

  • Reading: 54.2. A strong result, but slightly down on the previous month. The composite index which takes into account Manufacturing, Services, Output, and Business Activity rose to 53.6 from 53.3 - a 2 year high.

"Higher new business inflows underpinned rises in business activity and employment, while firms remained optimistic regarding future output. On prices, the rate at which output prices rose eased in April despite higher input cost inflation." -Judo Bank

Judo Bank Australia Composite PMI Output Index. Sources: Judo Bank, S&P Global PMI, Australian Bureau of Statistics via S&P Global Market Intelligence.

Later this week

Tuesday

• 18:00 EUR Flash Manufacturing PMI (46.5 forecast vs 47.3 previous) & Flash Services PMI (51.8 forecast vs 51.5 previous)

• 23:45 USA Flash Manufacturing PMI (52.0 forecast vs 51.9 previous) & Flash Services PMI (52.0 forecast vs 51.7 previous)

Wednesday

• 11:30 AUS Consumer Price Index (CPI) March quarter (+0.8% & +3.4% p.a. forecast vs +0.6% & 3.4% p.a. December quarter)

• 11:30 AUS CPI Trimmed Mean March quarter (+0.9% & +3.8% p.a. vs +0.8% December quarter & +4.1% p.a.)

• 23:30 USA Core Durable Goods Orders March (+0.3% forecast vs +0.3% February)

Thursday

• 22:30 USA Advance GDP March quarter (+2.5% p.a. forecast vs +3.4% p.a. December quarter)

Friday

• 00:00 USA Pending Home Sales March (+0.9% forecast vs +1.6% February)

• 12:00 (tentative) JPN Bank of Japan Policy Rate, Monetary Policy Statement, Outlook Report, Press Conference (forecast no change 0%-0.1%)

• 22:30 USA Core PCE Price Index March (+0.3% forecast & +2.7% p.a. vs +0.3% & 2.8% p.a. February)

Latest News

Interesting Movers

Trading higher

• +15.8% Cleanaway Waste Management (CWY) - Very late breaking news that Seven Group is mulling a takeover bid for the company [paywall]. Note: All of this gain occurred in the after market match! Quite extraordinary! Expect a speeding ticket from the ASX this afternoon with an explanation required tomorrow.

• +13.2% Mesoblast (MSB) - No news, possible continued positive response to 26 March FDA Notifies Clinical Data Sufficient for Refiling aGVHD BLA, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up, bounced off short term uptrend ribbon 🔎📈

• +9.1% Capitol Health (CAJ) - No news, possibly spillover positive response as a result of The Australian article Wesfarmers (WES) is considering a takeover of Ramsay Health Care (RHC) [paywall]

• +8.0% Healthco Healthcare and Wellness REIT (HCW) - HCW announces up to $50m on-market unit buy-back

• +6.6% WA1 Resources (WA1) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +5.9% Kogan.Com (KGN) - No news, bounced off long term uptrend ribbon 🔎📈

• +5.3% Iluka Resources (ILU) - No news, generally positive broker reviews yesterday following 19 April Quarterly Review to 31 March 2024

• +5.2% Cettire (CTT) - No news, bounce after sharp sell-off

Trading lower

• -13.5% Lifestyle Communities (LIC) - Lifestyle Communities Trading Update, fall is consistent with prevailing short and long term downtrends 🔎📉

• -9.5% Select Harvests (SHV) - 2024 Business Update, closed below long term trend ribbon 🔎📉

• -9.1% Ora Banda Mining (OBM) - March 2024 Quarterly Activities and Cashflow Reports, generally weaker gold sector on sharp pullback in gold price

• -6.6% Emerald Resources (EMR) - No news, generally weaker gold sector on sharp pullback in gold price

• -6.4% 29METALS (29M) - Quarterly Report for the March 2024 Quarter, fall is consistent with long term downtrend 🔎📈

• -6.3% Brambles (BXB) - FY24 Third Quarter Trading Update

• -5.9% Metals X (MLX) - No news, pullback after a stellar run, tin price slightly lower on LME Monday

• -5.5% Spartan Resources (SPR) - Completion of Placement and Institutional Entitlement Offer, generally weaker gold sector on sharp pullback in gold price

• -5.4% Capricorn Metals (CMM) - No news, generally weaker gold sector on sharp pullback in gold price

• -5.3% Duratec (DUR) - No news, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down, closed below $1.07 25 March point of demand 🔎📉

• -4.9% Genesis Minerals (GMD) - No news, generally weaker gold sector on sharp pullback in gold price

• -4.7% Chrysos Corporation (C79)- Chrysos Quarterly Presentation Q3 FY24

• -4.6% Newmont Corporation (NEM) - No news, generally weaker gold sector on sharp pullback in gold price

• -4.5% Regis Resources (RRL) - No news, generally weaker gold sector on sharp pullback in gold price

• -4.4% Predictive Discovery (PDI) - No news, generally weaker gold sector on sharp pullback in gold price

• -4.4% Ramelius Resources (RMS) - No news, generally weaker gold sector on sharp pullback in gold price

Broker Notes

29METALS (29M)

• Retained at neutral at Citi; Price Target: $0.45 from $0.55

• Retained at overweight at Morgan Stanley; Price Target: $0.55

The A2 Milk Company (A2M)

• Retained at hold at Bell Potter; Price Target: $5.70

Air New Zealand (AIZ)

• Retained at outperform at Macquarie; Price Target: $0.75 from $0.77

AMA Group (AMA)

• Retained at buy at Bell Potter; Price Target: $0.12 from $0.13

ASX (ASX)

• Retained at underweight at Morgan Stanley; Price Target: $53.50

Boss Energy (BOE)

• Retained at outperform at Macquarie; Price Target: $6.00

• Retained at equal-weight at Morgan Stanley; Price Target: $4.60

Bluescope Steel (BSL)

• Retained to buy from underweight at UBS; Price Target: $26.70 from $25.50

COG Financial Services (COG)

• Retained at buy at Bell Potter; Price Target: $1.70 from $1.84

Cosol (COS)

• Retained at hold at Bell Potter; Price Target: $1.10 from $1.05

Endeavour Group (EDV)

• Retained at buy at UBS; Price Target: $6.00

Galan Lithium (GLN)

• Downgraded to neutral from outperform at Macquarie; Price Target: $0.35 from $0.60

Imugene (IMU)

• Retained at buy at Bell Potter; Price Target: $0.15

Karoon Energy (KAR)

• Downgraded to neutral from positive at E&P; Price Target: $2.20

Nufarm (NUF)

• Retained at buy at Citi; Price Target: $5.80 from $5.60

Paladin Energy (PDN)

• Retained at buy at Citi; Price Target: $14.50

Ramelius Resources (RMS)

• Retained at neutral at Macquarie; Price Target: $2.00 from $1.90

South32 (S32)

• Downgraded to neutral from buy at Citi; Price Target: $3.80 from $3.50

• Retained at buy at Goldman Sachs; Price Target: $3.70 from $3.80

• Retained at buy at Jefferies; Price Target: $3.90

• Retained at overweight at JP Morgan; Price Target: $4.00 from $4.10

• Retained at outperform at Macquarie; Price Target: $3.90 from $3.80

• Retained at overweight at Morgan Stanley; Price Target: $3.35

• Retained at outperform at RBC Capital Markets; Price Target: $3.70

• Retained at buy at UBS; Price Target: $3.90 from $4.00

Vulcan Steel (VSL)

• Downgraded to neutral from buy at UBS; Price Target: $7.90 from $8.10

Westpac Banking Corporation (WBC)

• Retained at equal-weight at Morgan Stanley; Price Target: $23.00

Woodside Energy Group (WDS)

• Retained at neutral at UBS; Price Target: $30.80

Scans