Evening Wrap: ASX 200 dips in listless session, energy and uranium stocks prosper, lithium stocks keep sliding

The ASX 200 dipped into the red in a listless trading session as US markets are on holiday tonight in observance of Juneteenth.

Energy stocks rose on stronger uranium names – themselves powered by counterpart moves overseas Tuesday. Gold stocks also bounced.

In news, Niobium hopeful WA1 Resources (WA1) soared on well received results from its Luni project, and Firefly Metals (FFM) did similarly on well received results from its Green Bay project.

Not so good...and I feel like we're saying it too much (but spot lithium prices haven't seen an update in 27 trading sessions)...Lithium stocks. They kept sliding today...

In today's ChartWatch we try to untangle the diverging fortunes of the Energy sector with a look at Brent Crude Oil and Uranium.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 8.4 points lower at 7,769.7, roughly mid-range, 0.19% from its session low and 0.23% from its high. In the broader-based S&P/ASX 300 (XKO), advancers and decliners were nearly perfectly evenly split at 137 to 133.

As indicated by the advance/decline line above, it was a very even split among winners and losers today, and this was similarly reflected across the major sector indices. 5 up versus 6 down, but none of them moved more than 1% either way.

At the top of the sector leaderboard were a couple of areas of the market which have been doing it a bit tough lately...

The Gold (XGD) (+1.1%) sub-index took out top honours on only a very modest bounce in gold and silver prices over the last 24 hours. Still, benchmark US bond yields continue to trend lower on dovish Fedspeak, and this is no doubt helping gold.

The pick of ASX gold stocks today...

Remember, gold has no yield, rather, physical gold has attached to it significant costs of carry. So higher market yields increase the opportunity cost of holding gold, while lower market yields reduce it.

The next best sector, Energy (XEJ) (+0.85%), is far more interesting. It’s been downright terrible lately – consistently underperforming all of its major ASX sector counterparts for some time.

The XEJ has been a serial underperformer for some time…

I discuss a possible explanation for the XEJ’s modest resurgence in today's ChartWatch below, but also pose a conundrum as I note that several of the best performers in the sector were uranium stocks.

Finally a day in the sun for Energy stocks! 🥳

No one sector really blew up today, but Industrials (XNJ) (-0.61%) was lower mainly due to a fall in major constituents Reliance Worldwide Corporation (ASX: RWC) (-4%) and Brambles (ASX: BXB) (-2.5%). Financials (XFJ) (-0.36%) gave back a smidge today likely on a touch of profit taking.

Elsewhere, in Resources (XJR) (+0.20%), lithium had another tough day as spot prices in China fell for a 15th straight day (they haven't had an uptick in 27!), but futures are on track for a late-day rally to secure a rare gain.

Niobium hopeful WA1 Resources (ASX: WA1) (+27.6%) topped the sector's winners list after a well received update from its Luni target at its 100% owned West Arunta Project in Western Australia.

Another tough day for ASX lithium stocks, despite a late rally in GFEX lithium carbonate futures

ChartWatch

Brent Crude Oil Futures (back-adjusted, front month) NYMEX

A super interesting chart

If you've been reading this Evening Wrap for at least a few weeks, you'd know which ASX sector has been the absolute worst. As in, dismally, pitifully lousy.

That's right. Energy.

But I look at this chart and I have to wonder: Is Energy's fortune about to change?

At the very least, the short term trend in brent crude oil appears to have changed (i.e., from down to up).

Add to this a return to good price action (rising peaks and rising troughs), and a predominance (of some very impressive) demand-side candles – and there has definitely been a significant showing from the demand side since the 76.76 low.

Even better, points which we would ordinarily associate with supply, like 80.37-80.77 and 84.48-84.72 have been summarily dispensed with.

I suggest that brent now has a relatively clear run to the next – and I suggest substantially more impregnable – supply zone between 88.36-90.87.

Until I see a cluster of supply-side candles (i.e., black-bodied and or upward pointing shadows) or falling peaks, I can't see any reason why brent can't at least tickle that zone, and therefore seriously test the supply side's mettle up there.

84.48-84.72 is now demand, and it should persist all the way down to the dynamic demand expected at the short and long term trend ribbons.

Uranium U3O8 Futures (back-adjusted, front month) COMEX

Another super interesting chart

The last time we covered uranium was in ChartWatch in the Evening Wrap on 7 June.

In that last update, and the update before that, I warned that not all was well with uranium’s short term uptrend. Poor price action (falling peaks and falling troughs) indicated the supply-side was likely in control of the price.

I pointed out that a close below demand at 86.50 would officially commence a new short term downtrend, and that a close below 83.40 would officially neutralise the long term trend.

86.50’s gone. Short term downtrend…check.

83.40’s gone. Long term trend neutralised…check.

Note that latent demand at 83.40 and the bottom of the long term trend ribbon did eventually facilitate a bounce. But it has only gotten as far as 86.50 which is now supply.

And that’s now par for the course with uranium's price action: Falling peaks and falling troughs = Supply reinforcement and demand destruction.

My new call: A close below 82.90 commences a new long term downtrend in uranium.

What’s the bull case? I need to see a quick return to rising peaks and rising troughs (i.e., demand reinforcement and supply removal), and at least a close above the short term downtrend ribbon – now roughly at $88.60..

Economy

Today

• There weren't any major economic data releases in our time zone today

Later this week

Wednesday

• 00:00 USA non-trading day due to observance of Juneteenth

Thursday

• 11:15 CHINA 1-year & 5-year Loan Prime Rates (forecast unchanged at 3.45% and 3.95% respectively)

• 20:00 UK Monetary Policy Summary & Official Bank Rate (no change vs 5.25% previous)

Friday

• 17:15 EUR/UK French, German, Eurozone, & UK flash PMIs

• 23:45 USA Flash Manufacturing PMI May (forecast 51 vs 51.3 in April) & Flash Services PMI May (forecast 53.4 vs 54.8 in April)

Saturday

• 00:00 USA Existing Home Sales May (4.08M forecast vs 4.14M in April)

Latest News

Interesting Movers

Trading higher

• +27.6% WA1 Resources (WA1) - West Arunta Project - Luni Metallurgical Results, rise is consistent with prevailing long term uptrend, closed back above short term downtrend ribbon 🔎📈

• +13.7% Firefly Metals (FFM) - High-grade continuous mineralisation 460m outside resource, rise is consistent with prevailing long term uptrend, closed back above short term downtrend ribbon 🔎📈

• +9.0% Tyro Payments (TYR) - No news 🤔

• +7.0% EML Payments (EML) - No news, similar to TYR? Closed back above short and long term trend ribbons 🔎📈

• +6.7% Southern Cross Electrical Engineering (SXE) - Continued positive response to yesterday's NEWS, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.4% Chrysos Corporation (C79) - No news 🤔

• +4.4% Telix Pharmaceuticals (TLX) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.2% Deep Yellow (DYL) - No news, generally stronger uranium sector today after rally in Cameco and Sprott Uranium Miners ETF (URNM) in USA overnight, bouncing off long term uptrend ribbon 🔎📈

Trading lower

• -20.9% Helia Group (HLI) - Update on CBA contract, closed back below long term downtrend ribbon 🔎📉

• -4.4% Mesoblast (MSB) - No news 🤔

• -4.2% Beach Energy (BPT) - Continued negative response to yesterday's Strategic Review Outcomes Presentation, three rating downgrades from the brokers - see Broker Notes, fall is consistent with prevailing short and long term downtrends 🔎📉

• -4.2% QBE Insurance Group (QBE) - NA middle-market strategic review and 1H24 performance

• -4.0% Reliance Worldwide Corporation (RWC) - FY2024 Results Announcement Date, fall is consistent with prevailing short term downtrend, closed below long term downtrend ribbon 🔎📉

• -3.1% NIB (NHF) - nib and Pacific Smiles Group, fall is consistent with prevailing short and long term downtrends 🔎📉

• -2.9% Sayona Mining (SYA) - Further high-grade drill results at North American Lithitium, fall is consistent with prevailing short and long term downtrends 🔎📉

Broker Notes

• Life360 Inc. (360)

  • Retained at buy at Bell Potter; Price Target: $17.75 from $17.00

• Abacus Storage King (ASK)

  • Retained at neutral at Jarden; Price Target: $1.30

• Alumina (AWC)

  • Retained at neutral at Citi; Price Target: $1.65 from $1.60

• Beach Energy (BPT)

  • Retained at buy at Bell Potter; Price Target: $1.75 from $1.80

  • Downgraded to sell from neutral at Citi; Price Target: $1.40 from $1.60

  • Downgraded to neutral from overweight at Jarden; Price Target: $1.55 from $1.75

  • Downgraded to neutral from outperform at Macquarie; Price Target: $1.55 from $1.95

  • Retained at buy at UBS; Price Target: $1.75 from $1.85

• Champion Iron (CIA)

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

• Collins Foods (CKF)

  • Retained at sell at Citi; Price Target: $10.60

• Capstone Copper Corp. (CSC)

  • Initiated at outperform at Macquarie; Price Target: $12.60

• CSL (CSL)

  • Retained at outperform at Macquarie; Price Target: $330.00

• Fortescue (FMG)

  • Retained at neutral at Citi; Price Target: $23.50

• Iluka Resources (ILU)

  • Upgraded to buy from neutral at Citi; Price Target: $7.80

• James Hardie Industries (JHX)

  • Retained at neutral at Citi; Price Target: $53.40

• Arcadium Lithium (LTM)

  • Retained at buy at Citi; Price Target: $9.40

• Metcash (MTS)

  • Retained at buy at UBS; Price Target: $4.25

• New Hope Corporation (NHC)

  • Retained at neutral at Citi; Price Target: $4.85

• Premier Investments (PMV)

  • Retained at overweight at Morgan Stanley; Price Target: $39.50

• Rex Minerals (RXM)

  • Retained at buy at Shaw and Partners; Price Target: $0.86

• Stanmore Resources (SMR)

  • Retained at buy at Citi; Price Target: $3.95 from $4.00

• Whitehaven Coal (WHC)

  • Retained at buy at Citi; Price Target: $9.20 from $9.00

• Zip Co. (ZIP)

  • Retained at buy at Citi; Price Target: $1.40

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