Evening Wrap: ASX 200 lower as Flight Centre grounded, China lithium surge stokes sector rally

It's becoming my standard first line: Plenty going on under the surface, but not much movement in the benchmark S&P/ASX200.

The ASX 200 dipped 2 points or something. Boring.

Under the surface though...well I could discuss earnings hits like NextDC (NXT) and Worley (WOR), misses like Flight Centre (FLT), Perpetual (PPT), and Steadfast (SDF)...

Or I could get straight to the point and talk about today's MASSIVE rally in lithium stocks!

Let’s dive in!

Markets

ASX 200 Session Chart

The S&P/ASX200 (XJO) finished 2.6 points lower at 7,660.4, smack-bang in the middle of the day's trading range. Despite the fall, in the broader-based S&P/ASX 300 (XKO), advancers still managed to beat decliners by 172 to 102.

The biggest story today was undoubtedly the broad-based rally in the lithium and battery minerals sector. If you follow me on Twitter, you've no doubt been tracking the fortunes of lithium carbonate futures on the GFEX commodities exchange in China.

There's been plenty of anticipation of a "restocking rally" post Chinese New Year holidays, and the 16.6% move in six straight days of gains in lithium carbonate futures suggests something is afoot.

Perspective is everything when it comes to considering a rally in a downtrend

There's a brilliant meme doing the rounds which I will share with you here. The message is: Plenty of damage has been done and prices are still a long way down from the highs, so perhaps don't get too excited by the current rally! (Note the price referred to in the meme is for spodumene concentrate).

Thank you @Cyclops_Trader for this excellent meme!

From a technical perspective, the long term trend in lithium carbonate futures remains down. Whilst I have noted substantial improvement in the short term trend, I prefer to see a close above key historical resistance at RMB 113,800/t before declaring the beginning of a new uptrend. I note also the upper shadow on today's candle is pointing to some short term exhaustion.

ChartWatch

Pilbara Minerals (ASX: PLS)

Has the short squeeze begun?

On Monday I said that if the Pilbara Minerals share price closed above $4.01 shorts will become "untenable". Well then, looking at today's close of $4.17, I suggest they're untenable!

It is starting to look like a full blown short covering rally in PLS, with today's large gap, and close very near the high indicating substantial excess demand exists, and remains in the system, respectively.

The next key area of historical supply is not far away, however. Keep an eye on the price action and candles around the zone of $4.33 to $4.37. Black candles and or upward pointing shadows would indicated excess supply has returned.

Support now moves up to the dynamic support of the long term downtrend ribbon (remember it acts as dynamic resistance when the price is below it and dynamic support when the price is above it). The previous key supply zone of $3.89 to $4.01 should also now act as support.

Mineral Resources Ltd (ASX: MIN)

The turnaround in MinRes's technicals is impressive

It's also worth following up the MinRes chart today. I suggest it's rally is even more impressive than Pilbara's in terms of candles.

Today's gap and run, along with the close essentially at the high of the session, indicate there's plenty of unquenched demand in the market. I'm also encouraged by the close above the long term downtrend ribbon.

$70.97 is the key historical supply point now. The long term uptrend ribbon should provide dynamic support, as should $61.10.

Liontown Resources Ltd (ASX: LTR)

Last, but least?

Last but and perhaps least, is Liontown Resources. I don't mean this in a derogatory way, simply that the rally here is not as strong so far as the first two.

But there are signs it can continue to improve. Candles are becoming predominantly white, and today's strong move and close near the high speaks of unquenched excess demand in the system. Price action is moving back to higher peaks and higher troughs indicating buy the dip activity.

There's little in the way of historical supply points given the fall from $1.72 was so fluid. This is a good thing, as Liontown therefore has fewer major supply points in close proximity to content with compared to Pilbara and MinRes. Dynamic resistance from the the long term downtrend ribbon is also a fair distance away.

I'd dearly love to see some volume confirmation on a close above $1.265 to confirm a new short term uptrend has begun.

Economy

Today

• AU: Consumer Price Index CPI (3.4% p.a. actual vs +3.6% p.a. forecast vs +3.4% p.a. previous)

Later this week

• Wednesday

  • USA: Durable Goods Orders (-4.7% forecast vs 0.0% previous & Core +0.2% forecast and 0.5% previous)

  • USA: CB Consumer Confidence (114.8 forecast vs 114.8 previous)

• Thursday

  • USA: Prelim GDP December quarter (+3.3% p.a. forecast vs 3.3% p.a. previous)

  • AU: Retail Sales January (forecast +1.6% vs -2.7% previous)

• Friday

  • USA: Core PCE Price Index January (+0.4% forecast vs +0.2% previous)

  • CHN: Manufacturing PMI (49.1 forecast vs 49.2 previous) and Non-Manufacturing PMI (50.7 forecast vs 50.7 previous)

  • CHN: Caixin Manufacturing PMI (50.7 forecast vs 50.8 previous)

  • EU: Eurozone Core Consumer Price Index CPI (+2.9% p.a. forecast vs +3.3% p.a. previous)

• Saturday

  • USA: ISM Manufacturing PMI (49.5 forecast vs 49.1 previous)

Latest News

Interesting Movers

Trading higher

• +18.8% Brainchip Holdings (BRN) - Bounce after getting dumped yesterday on FY23 results yesterday

• +13.5% APM Human Services International (APM) - H1 FY24 Results, but mainly Updated Non-Binding Acquisition Proposal Received from CVC

• +13.1% Nextdc (NXT) - Half Year Report and Accounts, rise is consistent with prevailing short and long term uptrends

• +13.1% Zip Co (ZIP) - Rebounded after yesterday's H1FY24 results selloff, but treated well by the brokers today, and 2 x Becoming a substantial shareholder notices

• +10.5% Latin Resources (LRS) - 6th straight day of lithium price rally in China, sector rally, short covering

• +10.0% Liontown Resources (LTR) - 6th straight day of lithium price rally in China, sector rally, short covering

• +7.5% Pilbara Minerals (PLS) - 6th straight day of lithium price rally in China, sector rally, short covering

• +7.3% Polynovo (PNV) - Uranium sector bounce, many bouncing off long term uptrend ribbon

• +7.1% IGO (IGO) - 6th straight day of lithium price rally in China, sector rally, short covering

• +6.7% Nuix (NXL) - No news, rise is consistent with prevailing short and long term uptrends

• +6.4% Paladin Energy (PDN) - Uranium sector bounce, many bouncing off long term uptrend ribbon

• +6.0% Silex Systems (SLX) - Uranium sector bounce, many bouncing off long term uptrend ribbon

• +5.9% Lotus Resources (LOT) - Uranium sector bounce, many bouncing off long term uptrend ribbon

• +5.6% Block (SQ2) - No news, rise is consistent with prevailing short and long term uptrends

• +5.6% Deep Yellow (DYL) - Uranium sector bounce, many bouncing off long term uptrend ribbon

• +5.4% Arcadium Lithium (LTM) - 6th straight day of lithium price rally in China, sector rally, short covering

• +5.3% Lynas Rare Earths (LYC) - Rare earths deserve some love too!

• +5.3% Johns Lyng Group (JLG) - Bounce after getting dumped on H1 FY24 results yesterday

• +5.3% Develop Global (DVP) - No news, suggest rallying in sympathy with other beaten down battery metals co's

• +5.2% Clinuvel Pharmaceuticals (CUV) - Becoming a substantial shareholder notice, bounce after getting dumped on H1 FY24 results last week

Trading lower

• -12.0% Kelsian Group (KLS) - Half Year Report and Accounts, closed below long term uptrend ribbon

• -10.9% Zimplats Holdings (ZIM) - Half Year Report and Accounts, fall is consistent with prevailing short and long term downtrends

• -10.8% Neuren Pharmaceuticals (NEU) - DAYBUE net sales US$87.1 million in Q4 2023

• -10.0% Helia Group (HLI) - Downgraded to neutral from buy at Goldman Sachs; Price Target: $4.47 from $4.09

• -7.3% SSR Mining (SSR) - Fourth Quarter and Full-Year 2023 Results, fall is consistent with prevailing short and long term downtrends

• -6.7% Healius (HLS) - 2 x broker rating and 5 x price target downgrades (see Broker Moves), fall is consistent with prevailing short and long term downtrends

• -5.5% Fortescue (FMG) - Ex-dividend $1.08 fully franked

• -4.4% Reece (REH) - Pullback after surge following H1 FY24 results yesterday, broker response mainly to retain neutral / sell ratings (see Broker Moves)

• -3.9% Flight Centre Travel Group (FLT) - Half Year Report and Accounts

Broker Notes

• Abacus Group (ABG)

  • Retained at outperform at Macquarie; Price Target: $1.21 from $1.26

  • Retained at buy at Shaw and Partners; Price Target: $1.20

• Altium (ALU)

  • Retained at neutral at Macquarie; Price Target: $68.50

  • Downgraded to equalweight from overweight at Morgan Stanley; Price Target: $68.50 from $50.00

  • Retained at hold at Ord Minnett; Price Target: $68.50

  • Retained at neutral at UBS; Price Target: $68.50 from $40.60

• Austin Engineering (ANG) retained at buy at Shaw and Partners; Price Target: $0.50

• Atturra (ATA) retained at buy at Shaw and Partners; Price Target: $1.40 from $1.45

• Articore Group (ATG) retained at neutral at UBS; Price Target: $0.65 from $0.70

• Alumina (AWC)

  • Downgraded to neutral from overweight at Barrenjoey; Price Target: $1.10 from $1.20

  • Retained at neutral at Macquarie; Price Target: $1.10

• City Chic Collective (CCX) retained at buy at Citi; Price Target: $0.77

• Capricorn Metals (CMM) retained at neutral at Macquarie; Price Target: $4.80

• Cooper Energy (COE)

  • Upgraded to overweight from neutral at Jarden; Price Target: $0.19 from $0.15

  • Retained at outperform at Macquarie; Price Target: $0.20 from $0.18

• Coles Group (COL)

  • Retained at buy at Citi; Price Target: $19.00 from $18.00

  • Retained at neutral at Jarden; Price Target: $16.90 from $15.90

  • Retained at hold at Jefferies; Price Target: $17.00 from $16.50

  • Retained at underweight at JP Morgan; Price Target: $16.20 from $15.40

  • Retained at outperform at Macquarie; Price Target: $17.85 from $17.70

  • Retained at equalweight at Morgan Stanley; Price Target: $16.50

  • Retained at lighten at Ord Minnett; Price Target: $15.00 from $14.55

  • Retained at neutral at UBS; Price Target: $17.00 from $16.25

• Dicker Data (DDR)

  • Retained at buy at Citi; Price Target: $12.90

  • Retained at neutral at UBS; Price Target: $11.80 from $10.40

• Domino's Pizza Enterprises (DMP) retained at neutral at UBS; Price Target: $42.00

• Endeavour Group (EDV)

  • Upgraded to positive from neutral at E&P; Price Target: $5.86

  • Retained at accumulate at Ord Minnett; Price Target: $6.10

• G8 Education (GEM)

  • Retained at buy at Canaccord Genuity; Price Target: $1.43 from $1.40

  • Retained at neutral at Macquarie; Price Target: $1.26 from $1.16

  • Retained at outperform at RBC Capital Markets; Price Target: $1.50 from $1.40

  • Retained at neutral at UBS; Price Target: $1.25 from $1.15

• Helia Group (HLI)

  • Downgraded to neutral from buy at Goldman Sachs; Price Target: $4.47 from $4.09

  • Retained at neutral at Macquarie; Price Target: $4.00 from $3.90

  • Retained at hold at Ord Minnett; Price Target: $4.00 from $3.70

• Healius (HLS)

  • Retained at neutral at Barrenjoey; Price Target: $1.25 from $1.30

  • Downgraded to sell from neutral at Citi; Price Target: $1.10 from $1.25

  • Retained at negative at E&P; Price Target: $1.20

  • Retained at underperform at Jefferies; Price Target: $1.20 from $1.25

  • Downgraded to underweight from neutral at JP Morgan; Price Target: $1.00 from $1.30

  • Retained at neutral at Macquarie; Price Target: $1.35 from $1.40

  • Retained at underweight at Morgan Stanley; Price Target: $1.30

  • Retained at buy at Ord Minnett; Price Target: $3.00

• Ingenia Communities (INA) downgraded to neutral from buy at UBS; Price Target: $4.90 from $4.76

• Johns Lyng Group (JLG)

  • Retained at hold at Bell Potter; Price Target: $6.30 from $6.50

  • Retained at buy at Canaccord Genuity; Price Target: $8.65 from $9.00

  • Retained at buy at Citi; Price Target: $8.35

  • Upgraded to positive from neutral at E&P; Price Target: $6.27 from $5.79

  • Retained at overweight at JP Morgan; Price Target: $7.50 from $7.60

  • Retained at outperform at Macquarie; Price Target: $7.40 from $7.80

  • Retained at overweight at Morgan Stanley; Price Target: $7.20

• Keypath Education International (KED)

  • Retained at outperform at Macquarie; Price Target: $0.67 from $0.46

  • Retained at buy at Shaw and Partners; Price Target: $1.80

• Monash IVF Group (MVF) downgraded to market-weight from overweight at Wilsons; Price Target: $1.45

• Nextdc (NXT) retained at outperform at Macquarie; Price Target: $17.00

• Pointsbet Holdings (PBH) retained at overweight at Jarden; Price Target: $1.05 from $1.00

• Pilbara Minerals (PLS) downgraded to sell from neutral at Citi; Price Target: $3.60

• Polynovo (PNV)

  • Downgraded to underperform from outperform at CLSA; Price Target: $2.00 from $1.70

  • Retained at outperform at Macquarie; Price Target: $2.75 from $2.90

  • Upgraded to add from hold at Morgans; Price Target: $2.22 from $1.95

• Qoria (QOR) retained at buy at Ord Minnett; Price Target: $0.34

• Redox (RDX)

  • Retained at accumulate at Ord Minnett; Price Target: $2.85 from $2.80

  • Retained at buy at UBS; Price Target: $2.90

• Readytech Holdings (RDY)

  • Retained at outperform at Macquarie; Price Target: $3.80 from $4.25

  • Retained at buy at Shaw and Partners; Price Target: $4.90 from $5.00

• Regis Healthcare (REG)

  • Retained at overweight at Jarden; Price Target: $3.64 from $3.35

  • Retained at buy at Jefferies; Price Target: $4.00 from $3.70

  • Retained at overweight at JP Morgan; Price Target: $4.20 from $3.10

• Reece (REH)

  • Retained at underperform at Barrenjoey; Price Target: $20.00 from $14.00

  • Upgraded to neutral from sell at Citi; Price Target: $28.90 from $14.20

  • Retained at underweight at JP Morgan; Price Target: $15.65 from $14.35

  • Retained at underperform at Macquarie; Price Target: $19.40 from $16.50

  • Retained at underweight at Morgan Stanley; Price Target: $19.00 from $12.00

  • Retained at reduce at Morgans; Price Target: $22.10 from $15.50

  • Retained at lighten at Ord Minnett; Price Target: $20.80 from $15.50

  • Retained at sell at UBS; Price Target: $18.00 from $16.60

• Resimac Group (RMC)

  • Upgraded to neutral from sell at Citi; Price Target: $1.00 from $0.95

  • Upgraded to neutral from underweight at Jarden; Price Target: $1.02 from $1.03

  • Retained at neutral at Macquarie; Price Target: $1.10 from $1.01

• Steadfast Group (SDF) retained at outperform at Macquarie; Price Target: $6.40 from $6.10

• Siteminder (SDR)

  • Retained at overweight at Morgan Stanley; Price Target: $5.70 from $5.45

  • Retained at buy at Ord Minnett; Price Target: $6.72 from $5.68

  • Retained at buy at UBS; Price Target: $6.55

• Silk Logistics Holdings (SLH) retained at buy at Shaw and Partners; Price Target: $2.30 from $3.00

• Suncorp Group (SUN) retained at hold at Ord Minnett; Price Target: $13.50

• Trajan Group Holdings (TRJ) retained at buy at Ord Minnett; Price Target: $2.20 from $2.35

• Tyro Payments (TYR)

  • Retained at outperform at Macquarie; Price Target: $1.45 from $1.55

  • Retained at equalweight at Morgan Stanley; Price Target: $1.30 from $1.60

  • Retained at buy at UBS; Price Target: $1.55 from $1.65

• Woodside Energy Group (WDS)

  • Retained at neutral at Macquarie; Price Target: $32.00 from $31.00

  • Retained at overweight at Morgan Stanley; Price Target: $34.00 from $35.00

  • Retained at neutral at UBS; Price Target: $31.00 from $31.40

• Zip Co (ZIP)

  • Retained at neutral at Citi; Price Target: $0.78

  • Retained at hold at Jefferies; Price Target: $0.87 from $0.38

  • Retained at buy at Ord Minnett; Price Target: $1.08 from $0.95

  • Retained at sector perform at RBC Capital Markets; Price Target: $0.90

  • Retained at buy at Unified Capital Partners; Price Target: $1.33 from $1.31

Scans