Evening Wrap: ASX 200 sags on resources rout, nowhere to hide for copper, gold, nickel, lithium stocks

I guess we weren't so lucky today. Yes we have all the good stuff the world needs deep under the ground somewhere out the back of Kalgoorlie, or Port Hedland, or Broken Hill, or wherever...but the prices of the stuff dumped overnight and Aussie resources stocks paid the price today. Xero was good, however, as were a few other mostly defensive names.

For the good, the bad, and the downright hobbled...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 36.3 points lower at 7,811.8, 0.61% from its session low and 0.46% from its high. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 121 to 158.

The Information Technology (XIJ) (+2.2%) sector was the best performing sector today, likely in response to an 8.7% surge in the price of its second largest constituent, Xero (ASX: XRO). The accounting software giant reported better than expected FY24 profits.

Major broker UBS described it as "another strong result, particularly on FCF (free cash flow)". They retained a BUY rating on the company and a $141.90 target price. Jarden also called the result "strong", noting further that the top line outlook was good. Jarden retained their OVERWEIGHT rating and $141 price target.

Outside of XRO, the XIJ was a little sketchier, with several key names logging +2-3% losses. Notable in this regard is recent high flyer Life360 Inc. (ASX: 360) which pulled back 4.3%.

Today's best and worst ASX tech stocks

Also doing well today were the Health Care (XHJ) (+1.3%), Consumer Staples (XSJ) (+1.1%) , and Utilities (XUJ) (+1.0%) sectors – a particularly defensive bunch of stocks if I say so. Apart from Tech, which is very much a risk-on sector, defense appeared to be the name of the game today – hardly befitting of a market which is supposed to be on the verge of blitzing to record highs...🤔

Doing it tough today was the Resources (XJR) (-2.1%) sector, as the prices of copper, nickel, tin, and zinc each fell sharply on the London Metals Exchange on Wednesday. Precious metals, like gold and silver are also trading lower.

Within Resources, there really wasn't anywhere to hide – falls were widespread and severe in many cases (as you can see from the table below). Gold stocks feature heavily, with the Gold (XGD) falling -3.6%, but so too do copper, lithium and nickel stocks. (See ChartWatch below for further analysis on copper and gold.)

A tough day at the office for many Aussie resources stocks

ChartWatch

High Grade Copper futures COMEX

Supply has arrived

I don't usually follow up a chart the next day, but given the developments in copper in the last 24-hours, I feel it's necessary. You can check yesterday's analysis here – where I noted that "some consolidation would be healthy".

It's important to note: Excess supply can manifest itself in the candles in two ways:

1. Black bodies

2. Upward pointing shadows

On Wednesday, it was the former that struck the copper chart.

Prior to this, there was relatively very little showing from the supply-side. It was almost a unanimous wall of demand-side control with predominantly white candles and ever rising peaks and troughs.

So, if we say that prior to Wednesday’s candle, the market was in a state of immense excess demand – and that Wednesday’s candle announces the arrival of the supply-side to the copper party – then where does the copper price go from here?

I put to you there's just 3 possibilities from here:

1. It continues in some version of its present state (i.e., prices will keep going up at some rate)

2. Supply increases and or demand decreases sufficiently to cause a transition to a state of equilibrium (i.e., prices will go sideways)

3. Supply increases and or demand decreases to cause a transition to state of excess supply (i.e., prices will go down)

Given the severity of Wednesday’s supply-side showing, scenario 1 is most likely off the table for now. This leaves scenarios 2 and 3.

In these scenarios, the supply-side will probe lower points of demand. If demand holds, and supply is only temporary (the proverbial “just a bit of profit taking”), then the uptrend will likely continue.

If demand is fulfilled, and supply remains vigilant, then lower, and lower again demand points may be probed. In this scenario, the trend likely changes.

Points of demand to watch out for now include previous points of supply at 4.695-4.731. This area also coincides with the dynamic demand expected at the short term trend ribbon.

Watch the candles closely here. White bodies and or downward pointing shadows would indicate the supply-side push has run its course and that the demand-side is rock solid.

Alternatively, black bodies and upward pointing shadows would indicate demand is failing, and supply remains resolute.

The short term uptrend remains intact as long as the High Grade Copper futures price continues to close above the short term uptrend ribbon.

Gold futures COMEX

Um, ditto!

The gold chart is a bit ditto to copper. So just the key points of demand to watch out for here.

2337 is crucial. A close beneath there signals demand at that point, plus the dynamic demand expected at the short term uptrend ribbon, has been filled.

If this occurs, the gold chart is going to look very "double-toppish" – so for the sake of all gold bugs (don't look at me!) – let's hope it doesn't.

Below 2337, the next point of demand at 2285 is for all intents and purposes line in the sand sorta stuff.

Let's assume the glass remains half full – because this should be the default conclusion in light of prevailing short and long term uptrends.

A hold of 2337 with emphatic demand-side candles (white bodies and or downward pointing shadows) would hold the demand fort, steady the ship (and any other metaphors you want to throw in here), and likely set gold up for another tilt at the record high.

Economy

Today

• AUS Flash Manufacturing PMI

  • 49.6 vs 49.6 previous ➡️

• Flash Services PMI

  • 53.1 vs 53.6 previous ⬇️

Later this week

Thursday

• 17:15 (from) EU Various countries Flash Manufacturing and Services PMIs

• 23:45 USA Flash Manufacturing PMI (50.1 forecast vs 50.0 previous) & Flash Services PMI (51.5 forecast vs 51.3 previous)

Friday

• 22:30 USA Core Durable Goods Orders April (+0.1% forecast vs +0.0% March)

Latest News

Interesting Movers

Trading higher

• +9.1% Calix (CXL) - No news 🤔 Several beaten down tech stocks popped today amidst broader sector strength

• +8.7% Xero (XRO) - FY24 Results and Annual Report, retained at buy by three major brokers (see Broker Notes section), rise is consistent with prevailing short and long term uptrends 🔎📈

• +8.5% Fletcher Building (FBU) - No news, media speculation today that US-based Platinum Equity is considering a buyout for all or parts of the company

• +8.0% Cromwell Property Group (CMW) - Cromwell Sells European Fund Management Platform, closed above long term downtrend ribbon

• +6.0% Brainchip Holdings (BRN) - No news 🤔 Several beaten down tech stocks popped today amidst broader sector strength

• +6.0% Imugene (IMU) - No news 🤔 Several beaten down tech stocks popped today amidst broader sector strength

• +5.4% Weebit Nano (WBT) - No news 🤔 Several beaten down tech stocks popped today amidst broader sector strength

• +4.5% Gentrack Group (GTK) - Change in substantial holding (increase by Regal Funds Management), rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.2% Tyro Payments (TYR) - No news 🤔 Several beaten down tech stocks popped today amidst broader sector strength

• +4.1% Treasury Wine Estates (TWE) - Change in substantial holding (increase by State Street Corporation), closed back above short and long term trend ribbons 🔎📈

Trading lower

• -8.9% Latin Resources (LRS) - No news, generally tough day for resources companies, but particularly for lithium miners

• -7.5% Regis Resources (RRL) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in gold price see ChartWatch section)

• -7.1% Nufarm (NUF) - Appendix 4D and Half Year Accounts, fall is consistent with prevailing short and long term downtrends 🔎📉

• -6.7% Bellevue Gold (BGL) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in gold price see ChartWatch section)

• -6.4% Sandfire Resources (SFR) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in copper price see ChartWatch section)

• -5.7% 29METALS (29M) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in copper price see ChartWatch section)

• -5.3% Capricorn Metals (CMM) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in gold price see ChartWatch section)

• -5.3% Deep Yellow (DYL) - Becoming a substantial holder (increase by State Street Corporation), tough day also for uranium companies…start list of uranium biggest fallers 👇

• -5.3% Boss Energy (BOE) - Becoming a substantial holder (increase by State Street Corporation), tough day also for uranium companies

• -5.2% Nexgen Energy (Canada) (NXG) - NexGen Releases 2023 Sustainability Report, tough day also for uranium companies

• -5.2% Red 5 (RED) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in copper price see ChartWatch section)

• -5.0% Paladin Energy (PDN) - Becoming a substantial holder (increase by State Street Corporation), tough day also for uranium companies

• -5.0% Silver Mines (SVL) - No news, ditto for silver stocks

• -4.9% Firefly Metals (FFM) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in copper price see ChartWatch section)

• -4.9% Kingsgate Consolidated (KCN) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in gold price see ChartWatch section)

• -4.8% Nickel Industries (NIC) - No news, ditto for nickel stocks

• -4.8% Westgold Resources (WGX) - No news, generally tough day for resources companies, but particularly for gold miners (on the back of dip in gold price see ChartWatch section)

Broker Notes

• ANZ Group Holdings (ANZ) retained at buy at Goldman Sachs; Price Target: $28.15

• Eagers Automotive (APE)

  • Retained at buy at Bell Potter; Price Target: $13.35 from $14.75

  • Retained at neutral at Citi; Price Target: $13.85

  • Downgraded to neutral from neutral at E&P; Price Target: $9.00 from $12.18

  • Retained at neutral at Macquarie; Price Target: $10.60 from $14.00

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

  • Retained at add at Morgans; Price Target: $14.35 from $15.90

  • Retained at buy at Ord Minnett; Price Target: $12.80 from $16.00

  • Retained at neutral at UBS; Price Target: $11.20 from $14.10

• AUB Group (AUB)

  • Retained at buy at Goldman Sachs; Price Target: $32.50

  • Retained at overweight at Jarden; Price Target: $33.35 from $33.85

  • Retained at overweight at Morgan Stanley; Price Target: $37.00 from $37.25

  • Retained at buy at UBS; Price Target: $34.50

• Bendigo and Adelaide Bank (BEN) retained at neutral at Goldman Sachs; Price Target: $10.51

• Bank of Queensland (BOQ) retained at sell at Goldman Sachs; Price Target: $5.44

• BWP Trust (BWP) retained at underweight at Morgan Stanley; Price Target: $3.80 from $3.45

• Capitol Health (CAJ)

  • Retained at neutral at Jarden; Price Target: $0.27

  • Retained at buy at Ord Minnett; Price Target: $0.32 from $0.31

• Commonwealth Bank of Australia (CBA) retained at sell at Goldman Sachs; Price Target: $82.61

• Challenger (CGF) retained at buy at Goldman Sachs; Price Target: $7.50

• Cosol (COS) retained at buy at Ord Minnett; Price Target: $1.33 from $1.27

• Dalrymple Bay Infrastructure/Notes (DBI) retained at add at Morgans; Price Target: $3.05 from $3.03

• Domino's Pizza Enterprises (DMP) retained at neutral at UBS; Price Target: $40.00

• Dexus Industria Reit (DXI) retained at add at Morgans; Price Target: $3.20 from $3.18

• Graincorp (GNC) retained at buy at Bell Potter; Price Target: $9.20

• Healius (HLS) retained at neutral at Jarden; Price Target: $1.26

• Integral Diagnostics (IDX)

  • Retained at neutral at Jarden; Price Target: $2.59

  • Retained at buy at Ord Minnett; Price Target: $2.70 from $2.60

• Inghams Group (ING) retained at outperform at Macquarie; Price Target: $4.20

• Judo Capital Holdings (JDO) retained at buy at Goldman Sachs; Price Target: $1.72

• James Hardie Industries (JHX) downgraded to neutral from buy at Citi; Price Target: $53.40 from $63.00

• Medadvisor (MDR) retained at buy at Bell Potter; Price Target: $0.49 from $0.47

• Medibank Private (MPL)

  • Retained at hold at Citi; Price Target: $3.80

  • Retained at neutral at Goldman Sachs; Price Target: $3.70

  • Retained at neutral at Jarden; Price Target: $3.85

  • Retained at neutral at Macquarie; Price Target: $3.60

  • Retained at equal-weight at Morgan Stanley; Price Target: $3.84

• Monash IVF Group (MVF) retained at outperform at Macquarie; Price Target: $1.55

• National Australia Bank (NAB) downgraded to neutral from buy at Goldman Sachs; Price Target: $34.04

• NIB Holdings (NHF)

  • Retained at buy at Citi; Price Target: $8.60

  • Retained at buy at Goldman Sachs; Price Target: $8.10

  • Retained at neutral at Jarden; Price Target: $8.00

  • Retained at neutral at Macquarie; Price Target: $7.30

  • Retained at equal-weight at Morgan Stanley; Price Target: $7.35

• Nufarm (NUF)

  • Retained at hold at Bell Potter; Price Target: $6.35

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

  • Retained at buy at UBS; Price Target: $7.00

• Patriot Battery Metals Inc (PMT) retained at outperform at Macquarie; Price Target: $1.90 from $2.00

• Qantas Airways (QAN) retained at outperform at Macquarie; Price Target: $6.00

• Ramsay Health Care (RHC) retained at equal-weight at Morgan Stanley; Price Target: $55.00

• Ridley Corporation (RIC)

  • Upgraded to buy from outperform at CLSA; Price Target: $2.80 from $2.65

  • Retained at buy at UBS; Price Target: $2.65 from $2.80

• Rio Tinto (RIO) retained at overweight at Morgan Stanley; Price Target: $139.00

• Regis Resources (RRL) downgraded to neutral from buy at Bank of America; Price Target: $2.30 from $2.55

• South32 (S32)

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

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

• Sonic Healthcare (SHL) retained at neutral at Jarden; Price Target: $26.19 from $28.88

• Select Harvests (SHV) retained at hold at Bell Potter; Price Target: $4.10

• Skycity Entertainment Group (SKC) retained at outperform at Macquarie; Price Target: NZ$2.45 from NZ$2.75

• Supply Network (SNL) downgraded to accumulate from buy at Ord Minnett; Price Target: $22.50 from $19.20

• Technology One (TNE)

  • Upgraded to add from hold at Morgans; Price Target: $20.50 from $16.50

  • Retained at hold at Shaw and Partners; Price Target: $17.30

• Westpac Banking Corporation (WBC) downgraded to sell from neutral at Goldman Sachs; Price Target: $24.00

• Webjet (WEB)

  • Retained at buy at Citi; Price Target: $10.70 from $9.90

  • Retained at positive at E&P; Price Target: $10.82 from $10.90

  • Retained at buy at Jarden; Price Target: $10.30 from $9.55

  • Retained at hold at Jefferies; Price Target: $9.00 from $8.90

  • Retained at equal-weight at Morgan Stanley; Price Target: $9.30 from $8.50

  • Retained at add at Morgans; Price Target: $11.20 from $10.33

  • Retained at buy at Ord Minnett; Price Target: $10.50 from $10.18

  • Retained at outperform at RBC Capital Markets; Price Target: $10.00 from $9.50

  • Retained at buy at Shaw and Partners; Price Target: $10.70 from $9.30

  • Retained at buy at UBS; Price Target: $10.60 from $10.00

• Xero (XRO)

  • Retained at buy at Citi; Price Target: $144.75

  • Retained at overweight at Jarden; Price Target: $141.00

  • Retained at buy at UBS; Price Target: $141.90

Scans