ASX200 Afternoon Report May 26th 2022

The ASX200 is trading 39 points lower at 7117 at 3.15 pm Sydney time.

In a carbon copy of the price action most days this week, an early rally ran into a wall of selling ahead of 7200, a level that the ASX200 has been pinned below since a sharp selloff in early May.

Large institutional orders often cause price action like this, imprinting like footprints in the sand. The most likely cause of the selling fears is that China’s economic slowdown is spiralling through the safety net of fiscal stimulus without an end in sight to China’s Covid Zero strategy.    

Highlighted by Premier Li Keqiang, who said overnight, “Economic indicators in China have fallen significantly, and difficulties in some aspects and to a certain extent are greater than when the epidemic hit us several in 2020.”    

Dragging the index into negative territory, the big miners on concerns about softening commodity prices. New Hope Corp (NHC) fell 7.5% to $3.79, and Whitehaven Coal (WHC) fell 4.8% to $5.03. Coronado Coal (CRN) fell 2.58% to $2.27. Elsewhere Fortescue Metals (FMG) fell 2.56% to $20.16. Rio Tinto (Rio) dropped 0.9% to $110.97; BHP Group (BHP) fell 0.67% to $42.72. South32 (S32) fell 0.85% to $4.63.

Consumer Staples stocks were another big loser as Graincorp (GNC) fell 2.9% to $9.71, Costa Group (CGC) fell 2.2% to $3.09, and Woolworths (WOW) fell 2.15% to $34.13. Coles fell 2.15% to %17.61.

A mixed day for the finance sector. Westpac (WBC) added 1.8% to $23.96, while the other majors fell led by Commonwealth Bank (CBA) which dropped 0.55% to $105.59, National Australia Bank (NAB) fell 2.4% to $31.59, ANZ fell by 0.1% to $25.62.

The price of gold has slumped back below $1850, taking local gold stocks with it. Northern Star (NST) fell 2.4% to $8.89, Newcrest Mining (NCM) fell 2% to $24.76, Silver Lake Resources (SLR) added 2% to $1.55, Evolution Mining fell 0.65% to $3.79.  

Artificial intelligence data services company Appen (APX) soared ~30% to $8.27 after becoming the target of a A$1.2 billion unsolicited takeover proposal from Telus International. Before the bid, Appen had fallen 43% year to date. Elsewhere Sezzle (SZL), added 6.1% to $0.52, Tyro Payments (TYR) added 5.3% to $1.04, Zip (ZIP) added 2.87% to $0.87c. Wisetech Global (WTC) added 2.6% to $40.89.

A mixed day for Lithium miners, Lake Resources (LKE) added 1.75% to $1.47, Allkem (AKE) added 1.65% to $13.53, Pilbara Minerals (PLS) lifted 1% to $2.80. Vulcan Energy (VUL) fell 1% to $7.18, and Liontown Resources (LTR) fell 0.8% to $1.29.

Technically, the failure of the ASX200 to break above critical resistance at 7200 yet again today brings under review our preferred view for a rally towards 7300. Instead, while below 7200, the risks are rising for a retest of support and range lows 6950/6750 area.

Source Tradingview. The figures stated are as of May 26th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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The ASX200 is trading 39 points lower at 7117 at 3.15 pm Sydney time.

In a carbon copy of the price action most days this week, an early rally ran into a wall of selling ahead of 7200, a level that the ASX200 has been pinned below since a sharp selloff in early May.

Large institutional orders often cause price action like this, imprinting like footprints in the sand. The most likely cause of the selling fears is that China’s economic slowdown is spiralling through the safety net of fiscal stimulus without an end in sight to China’s Covid Zero strategy.    

Highlighted by Premier Li Keqiang, who said overnight, “Economic indicators in China have fallen significantly, and difficulties in some aspects and to a certain extent are greater than when the epidemic hit us several in 2020.”    

Dragging the index into negative territory, the big miners on concerns about softening commodity prices. New Hope Corp (NHC) fell 7.5% to $3.79, and Whitehaven Coal (WHC) fell 4.8% to $5.03. Coronado Coal (CRN) fell 2.58% to $2.27. Elsewhere Fortescue Metals (FMG) fell 2.56% to $20.16. Rio Tinto (Rio) dropped 0.9% to $110.97; BHP Group (BHP) fell 0.67% to $42.72. South32 (S32) fell 0.85% to $4.63.

Consumer Staples stocks were another big loser as Graincorp (GNC) fell 2.9% to $9.71, Costa Group (CGC) fell 2.2% to $3.09, and Woolworths (WOW) fell 2.15% to $34.13. Coles fell 2.15% to %17.61.

A mixed day for the finance sector. Westpac (WBC) added 1.8% to $23.96, while the other majors fell led by Commonwealth Bank (CBA) which dropped 0.55% to $105.59, National Australia Bank (NAB) fell 2.4% to $31.59, ANZ fell by 0.1% to $25.62.

The price of gold has slumped back below $1850, taking local gold stocks with it. Northern Star (NST) fell 2.4% to $8.89, Newcrest Mining (NCM) fell 2% to $24.76, Silver Lake Resources (SLR) added 2% to $1.55, Evolution Mining fell 0.65% to $3.79.  

Artificial intelligence data services company Appen (APX) soared ~30% to $8.27 after becoming the target of a A$1.2 billion unsolicited takeover proposal from Telus International. Before the bid, Appen had fallen 43% year to date. Elsewhere Sezzle (SZL), added 6.1% to $0.52, Tyro Payments (TYR) added 5.3% to $1.04, Zip (ZIP) added 2.87% to $0.87c. Wisetech Global (WTC) added 2.6% to $40.89.

A mixed day for Lithium miners, Lake Resources (LKE) added 1.75% to $1.47, Allkem (AKE) added 1.65% to $13.53, Pilbara Minerals (PLS) lifted 1% to $2.80. Vulcan Energy (VUL) fell 1% to $7.18, and Liontown Resources (LTR) fell 0.8% to $1.29.

Technically, the failure of the ASX200 to break above critical resistance at 7200 yet again today brings under review our preferred view for a rally towards 7300. Instead, while below 7200, the risks are rising for a retest of support and range lows 6950/6750 area.

 

Source Tradingview. The figures stated are as of May 26th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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