Don't buy the lithium dip: Morgan Stanley
Thu 30 May 24, 1:17pm (AEST)
Home
/
News
Market Wraps
/Evening Wrap: ASX 200 logs third straight fall as lithium, copper, and battery metals stocks dumped
News
Market Wraps
/Evening Wrap: ASX 200 logs third straight fall as lithium, copper, and battery metals stocks dumped
Market Wraps
Evening Wrap: ASX 200 logs third straight fall as lithium, copper, and battery metals stocks dumped
Thu 30 May 24, 5:34pm (AEST)
Stocks in article
The S&P/ASX 200 closed 37.4 points lower, down 0.49%.
It was another tough day at the office for Aussie shares, and an even tougher day for mining stocks. Recent copper high flyers joined lithium, iron ore, and other battery metals stocks at the bottom of the losers list.
It wasn't all doom an gloom, however, as Qantas led industrial stocks higher, and fast food companies bolstered the Discretionary sector. The theory on the latter is should interest rates go up, we'll all be eating more KFC and Domino's!
We're now three down days in a row, and a nasty 8 out of the last 10. It's starting to get/feel ugly out there, and let's face it, Friday's aren't exactly known for their winning ways...
Let's dive in!
Today in Review
Thu 30 May 24, 4:43pm (AEST)
Enjoying the Evening Wrap? Sign up to get it sent directly to your inbox after every trading day.
Markets
ASX 200 Session Chart
The S&P/ASX 200 (XJO) finished 37.4 points lower at 7,628.2, 0.49% from its session high and 0.35% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 104 to 174.
As is the topsy-turvy nature of trading over the last few weeks, yesterday’s best performer was today’s worst. The Gold (XGD) (-3.3%) sub-index slumped on the back of a modest decline in the gold price over the last 24-hours – but perhaps it’s more to do with expectations of where the price might go next (see ChartWatch below).
Company | Last Price | Change $ | Change % | 1mo % | 1yr % |
|---|---|---|---|---|---|
Regis Resources (RRL) | $1.795 | -$0.125 | -6.5% | -14.1% | -7.9% |
Genesis Minerals (GMD) | $1.800 | -$0.11 | -5.8% | +7.1% | +44.6% |
De Grey Mining (DEG) | $1.080 | -$0.05 | -4.4% | -17.6% | -18.8% |
Bellevue Gold (BGL) | $1.845 | -$0.085 | -4.4% | +7.0% | +45.3% |
Perseus Mining (PRU) | $2.29 | -$0.1 | -4.2% | +5.0% | +23.5% |
Capricorn Metals (CMM) | $4.60 | -$0.19 | -4.0% | -3.2% | +8.7% |
Silver Lake Resources (SLR) | $1.450 | -$0.05 | -3.3% | +5.1% | +36.2% |
West African Resources (WAF) | $1.430 | -$0.045 | -3.1% | +12.2% | +64.4% |
Gold Road Resources (GOR) | $1.605 | -$0.05 | -3.0% | +0.6% | -8.5% |
Evolution Mining (EVN) | $3.83 | -$0.11 | -2.8% | -2.3% | +10.4% |
Northern Star Resources (NST) | $13.96 | -$0.4 | -2.8% | -3.3% | +10.5% |
Resolute Mining (RSG) | $0.535 | -$0.015 | -2.7% | +27.4% | +17.6% |
Ramelius Resources (RMS) | $1.860 | -$0.05 | -2.6% | -4.6% | +40.9% |
Silver Mines (SVL) | $0.190 | -$0.005 | -2.6% | +15.2% | 0% |
Emerald Resources (EMR) | $3.69 | -$0.09 | -2.4% | +13.2% | +96.8% |
Newmont Corporation (NEM) | $62.01 | -$1.39 | -2.2% | -0.5% | 0% |
The best and worst from the gold sector today
The Resources (XJR) (-1.9%) sector more generally had a tough day today. It wasn't so much that commodity prices are lower in the last 24-hours, in most cases they're not, it's just sentiment has soured after some strong runs in several base metals stocks.
Serial disappointer lithium, which hasn't enjoyed any strength of late, found itself at the top of the Resources losers list, but iron ore, copper (see ChartWatch), nickel, and uranium stocks weren't far behind.
Company | Last Price | Change $ | Change % | 1mo % | 1yr % |
|---|---|---|---|---|---|
Chalice Mining (CHN) | $1.580 | -$0.21 | -11.7% | +34.5% | -77.9% |
Winsome Resources (WR1) | $1.100 | -$0.145 | -11.6% | -20.0% | -41.0% |
Wildcat Resources (WC8) | $0.420 | -$0.055 | -11.6% | -15.2% | +508.7% |
29METALS (29M) | $0.545 | -$0.05 | -8.4% | +6.9% | -17.2% |
Liontown Resources (LTR) | $1.280 | -$0.075 | -5.5% | +4.5% | -53.6% |
Spartan Resources (SPR) | $0.740 | -$0.04 | -5.1% | +28.7% | +495.8% |
Sandfire Resources (SFR) | $9.20 | -$0.49 | -5.1% | -0.3% | +63.4% |
Vulcan Energy Resources (VUL) | $4.75 | -$0.22 | -4.4% | +43.5% | +22.1% |
IGO (IGO) | $6.98 | -$0.32 | -4.4% | -10.5% | -51.1% |
Grange Resources (GRR) | $0.385 | -$0.015 | -3.8% | -3.8% | -28.0% |
Nickel Industries (NIC) | $0.935 | -$0.035 | -3.6% | -3.1% | +7.5% |
Coronado Global Resources Inc. (CRN) | $1.075 | -$0.04 | -3.6% | -5.7% | -21.5% |
Core Lithium (CXO) | $0.135 | -$0.005 | -3.6% | -6.9% | -86.8% |
Adriatic Metals (ADT) | $4.06 | -$0.14 | -3.3% | -10.8% | +28.1% |
Syrah Resources (SYR) | $0.440 | -$0.015 | -3.3% | -18.5% | -47.5% |
Lotus Resources (LOT) | $0.450 | -$0.015 | -3.2% | 0% | +157.1% |
Fortescue (FMG) | $24.78 | -$0.79 | -3.1% | -2.1% | +24.8% |
Ugly day for Aussie Resources stocks...
It wasn’t all doom and gloom on the ASX today, four of the 11 major sectors logged gains, led by Consumer Discretionary (XDJ) (+0.74%) which bounced back after yesterday’s CPI shock-induced falls.
Investors clearly took stock after yesterdays CPI, though, as fears higher interest rates (not very likely – see here) would drive more Aussies to fast food outlets at Collins Foods (ASX: CKF) (+3.3%) and Domino's Pizza Enterprises (ASX: DMP) (+2.9%) saw their share prices rise.
There’s a bit of overlap between Discretionary and another sector that rose today, Industrials (XNJ) (+0.27%), for example Qantas Airways (ASX: QAN) (+2.7%) is one of the biggest stocks in the XNJ but you could easily argue its discretionary credentials.
QAN, along with APM Human Services International (ASX: APM) (+7.8%) which rose on continued takeover speculation, and NRW Holdings (ASX: NWH) (+3.4%) which enjoyed a rating upgrade from broker Jarden (see Broker Notes), were major contributors to the XNJ's gains today.
Company | Last Price | Change $ | Change % | 1mo % | 1yr % |
|---|---|---|---|---|---|
APM Human Services (APM) | $1.250 | +$0.09 | +7.8% | +3.7% | -32.4% |
NRW Holdings (NWH) | $3.00 | +$0.1 | +3.4% | +8.7% | +35.7% |
Collins Foods (CKF) | $9.35 | +$0.3 | +3.3% | -4.2% | +8.3% |
Domino's Pizza Enterprises (DMP) | $38.22 | +$1.09 | +2.9% | -2.8% | -19.9% |
Reliance Worldwide Corporation (RWC) | $4.84 | +$0.13 | +2.8% | -3.8% | +15.0% |
Qantas Airways (QAN) | $6.07 | +$0.16 | +2.7% | +4.1% | -5.5% |
Maas Group Holdings (MGH) | $4.06 | +$0.09 | +2.3% | -4.7% | +18.7% |
Kelsian Group (KLS) | $5.14 | +$0.1 | +2.0% | -6.7% | -24.2% |
McMillan Shakespeare (MMS) | $16.47 | +$0.27 | +1.7% | -10.0% | +6.9% |
ARB Corporation (ARB) | $37.88 | +$0.53 | +1.4% | +0.1% | +32.1% |
Webjet (WEB) | $8.62 | +$0.11 | +1.3% | +7.2% | +15.6% |
Service Stream (SSM) | $1.215 | +$0.015 | +1.3% | -2.8% | +88.4% |
Super Retail Group (SUL) | $13.04 | +$0.16 | +1.2% | -8.8% | +13.7% |
Premier Investments (PMV) | $29.88 | +$0.3 | +1.0% | +1.1% | +28.0% |
ALS (ALQ) | $13.96 | +$0.14 | +1.0% | +7.8% | +18.8% |
The best Discretionary and Industrial stocks today
ChartWatch
Gold Futures COMEX
Gold just feels like its's losing its shine
The last time we covered gold futures was in ChartWatch in the Evening Wrap on 23 May.
I kinda have to use the pun here – gold appears to be “losing its shine”. Translating this back to technical analysis, I could say that gold is losing its upside momentum.
I’ve said in my last couple of updates that the gold chart is looking “very double-toppish" with two strong downside pushes from 2472 and 2477.
The demand-side response was solid the first time around – as one would expect from what was at the time such a strong prevailing uptrend. But this second time, the candles are a little too black, and upside volatility a little too muted, for my liking.
Also, I note a few (including potentially today’s live candle) closes below the short term uptrend ribbon which has neutralised. The short term uptrend ribbon is supposed to be dynamic demand – and it’s worked like clockwork up to this point in the rally – so I ask then, what’s up with gold?
It’s starting to feel like the demand-side has lost its voracious appetite, and if this indeed is the case, it likely won’t be long before the supply-side starts to panic.
The 2349 point of demand is important now, a close beneath it builds the case for a transition to supply-side control. A close below 2308 confirms it.
The glass is still half full, though, gold bugs! Note the long black candle on 23 May. I suggest that if gold can close back above its high (i.e., where the supply side took control from) it would bolster confidence in gold’s ability to maintain both short and long term uptrends, and therefore its ability to print new highs. That level is 2409.
Copper Futures COMEX
Copper's price action is flirting with the short term trend ribbon
The last time we covered high grade copper futures was in ChartWatch in the Evening Wrap on 23 May. In that update, copper had just printed a big black candle from the major supply zone between 5.03-5.21.
I gave you 3 scenarios last week – and I pretty much ruled out the one where copper goes back up – so, today’s move isn’t surprising for students of the candles!
Big black candles, after an exponential move, in a well-defined supply zone, and on a big spike in volume, are never a good look.
But they’re not always the death knell for an uptrend either, rather, they serve as critical evidence the supply-side has arrived in force. What happens next is equally important as the big black candle itself.
The demand-side can regroup, and if they relish the new supply that has appeared at lower prices – soak it all up and then beg for more at higher prices. New highs here we come!
But if the demand-side goes missing in action, and you’ll know this by the feebleness of the subsequent price action, then it speaks of a bigger issue at hand. The question becomes: Have the demand-side exhausted their resources – at least for now?
As I said for gold, if this is the case, and if the supply-side get a sniff of this – it won’t be long until they swell their ranks. The hot money that came rushing in for a quick momentum gain on the way up will go rushing for the sidelines.
In theory, old points of supply should act as future points of demand. So, it’s disturbing to see today’s live candle ebbing below the 3 June 2022 major peak of 4.731, and also nudging the minor peak at 4.695.
It’s a live candle, so I must discount it – but it’s a fact that a close below each of these potential points of demand suggests they’re not points of demand at all. Da, da, daaaam…!
Given the strength of the prevailing short and long term uptrend ribbons, one should not write off the demand-side just yet. There’s every possibility they regroup within the short term uptrend ribbon, which does also coincide with 4.695.
You will know if this has occurred when you see white-bodied candles and or downward pointing shadows in the light green zone. How do you get a downward pointing shadow? You take today’s currently black candle, add a whole heap of excess demand, and jam its close all the way back to the session’s high!
That would demonstrate to the market the demand-side remains active, it’s strong, and that it’s still buying dips. It would also mean there’s potentially still more in this copper run.
Fascinating stuff, and a fascinating next 24 hours ahead for copper.
Just note that I won’t be here riding shotgun with you for the next couple of trading sessions as I’m off to sunny Melbourne for a few days for my son’s footy trip.
Kerry will be on Evening Wrap duties in my absence with a "lite" version. I’ll catch you and the charts next on Tuesday.
Economy
Today
AUS Building Approvals April
-0.3% m/m vs +1.8% m/m forecast and +1.9% m/m March
Private sector houses -1.6% m/m, Units/townhouses -1.1% m/m
Value of new residential building -3.8% m/m, value of non-residential building -4.6% m/m
Big miss in a major employment industry. Finding it hard to get tradies? That might not be such a problem in the next 6-12 months...
Source: Australian Bureau of Statistics (April 2024), Building Approvals, Australia, ABS Website, 30 May 2024.
Later this week
Friday
00:00 USA Pending Home Sales April (+0.1% m/m forecast vs +3.4% m/m March)
11:30 CHN Manufacturing PMI May (50.4 forecast vs 50.4 April)
11:30 CHN Non-Manufacturing PMI May (51.5 forecast vs 51.2 April)
19:30 EUR Core CPI Flash Estimate May (+2.5% p.a. forecast vs +2.4% p.a. April)
22:30 USA Core PCE Price Index April (+0.2% m/m and +2.8% p.a. forecast vs +0.3% m/m and +2.8% p.a. March)
Latest News
Interesting Movers
Trading higher
+9.7% Catapult Group International (CAT) - FY24 Appendix 4E and Full Year Statutory Accounts, rise is consistent with prevailing short and long term uptrends 🔎📈
+7.8% APM Human Services International (APM) - No news, continued media speculation private equity is running the ruler over the company
+4.3% Peninsula Energy (PEN) - No news, bouncing back after recent decline 🔎📈
+4.3% WA1 Resources (WA1) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈
+3.6% Pro Medicus (PME) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈
+3.4% NRW Holdings (NWH) - No news, upgraded to buy from overweight at Jarden, price target increased to $3.25 from $2.95
+3.3% Collins Foods (CKF) - No news, nasty CPI print could spell higher rates - which means more fast food!
+3.0% Jupiter Mines (JMS) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈
+2.9% Domino's Pizza Enterprises (DMP) - No news, nasty CPI print could spell higher rates - which means more fast food!
+2.8% Data#3 (DTL) - No news, upgraded to positive from neutral at E&P, price target increased to $8.46 from $5.50
+2.7% Qantas Airways (QAN) - No news, retained at buy at Goldman Sachs
Trading lower
-11.7% Chalice Mining (CHN) - No news, battery metals stocks took a beating today, fall is consistent with long term downtrend, repelled by long term downtrend ribbon 🔎📉
-11.6% Winsome Resources (WR1) - No news, battery metals stocks took a beating today, closed below long term downtrend ribbon 🔎📉
-11.6% Wildcat Resources (WC8) - No news, battery metals stocks took a beating today, closed below long term downtrend ribbon 🔎📉
-9.9% Calix (CXL) - Calix ZESTY Investor Webinar, fall is consistent with prevailing short and long term downtrends 🔎📉
-9.8% Mesoblast (MSB) - No news, tipped major supply zone
-8.4% 29METALS (29M) - No news, copper stocks took a beating today
-6.5% Regis Resources (RRL) - No news, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉
-5.8% Genesis Minerals (GMD) - No news, gold stocks took a beating today
-5.5% Liontown Resources (LTR) - No news, battery metals stocks took a beating today, fall is consistent with long term downtrend, repelled by long term downtrend ribbon 🔎📉
Broker Notes
APA Group (APA) retained at hold at Ord Minnett; Price Target: $9.30
Bendigo and Adelaide Bank (BEN) upgraded to buy from neutral at Bank of America; Price Target: $12.00 from $10.40
Brazilian Rare Earths (BRE) initiated at buy at Ord Minnett; Price Target: $6.10
BWP Trust (BWP)
Retained at sell at Citi; Price Target: $3.40
Retained at hold at Ord Minnett; Price Target: $6.60
Charter Hall Group US Prohibited (CHC) retained at buy at Citi; Price Target: $13.40
Corporate Travel Management (CTD) retained at buy at Shaw and Partners; Price Target: $17.30 from $20.00
Data#3 (DTL) upgraded to positive from neutral at E&P; Price Target: $8.46 from $5.50
Dexus (DXS) retained at hold at Citi; Price Target: $8.20
Fisher & Paykel Healthcare Corporation (FPH)
Retained at neutral at Citi; Price Target: NZ$8.75 from NZ$26.25
Retained at outperform at CLSA; Price Target: $28.60 from $26.25
Retained at underweight at Jarden; Price Target: NZ$25.30 from NZ$23.20
Retained at hold at Jefferies; Price Target: NZ$26.50 from NZ$23.50
Retained at neutral at Macquarie; Price Target: NZ$27.85 from NZ$26.15
Retained at equal-weight at Morgan Stanley; Price Target: $23.11
Retained at lighten at Ord Minnett; Price Target: $23.00 from $21.70
Retained at buy at UBS; Price Target: NZ$32.80 from NZ$29.10
Upgraded to overweight from marketweight at Wilsons; Price Target: $30.00 from $23.25
Fonterra Shareholders' Fund (FSF) retained at outperform at Macquarie; Price Target: NZ$4.36 from NS$4.01
Goodman Group (GMG) retained at buy at Citi; Price Target: $32.50
Hastings Technology Metals (HAS) initiated at hold at Ord Minnett; Price Target: $0.27
IGO (IGO) retained at underweight at Morgan Stanley; Price Target: $6.05
IPD Group (IPG) retained at buy at Shaw and Partners; Price Target: $5.50
Lendlease Group (LLC)
Retained at neutral at Citi; Price Target: $6.90
Retained at neutral at UBS; Price Target: $7.10
Lynas Rare Earths (LYC) initiated at buy at Ord Minnett; Price Target: $8.00
Mineral Resources (MIN)
Retained at overweight at Morgan Stanley; Price Target: $83.00
Retained at hold at Ord Minnett; Price Target: $67.00
Newmont Corporation (NEM) retained at accumulate at Ord Minnett; Price Target: $78.00
Northern Minerals (NTU) initiated at hold at Ord Minnett; Price Target: $0.04
NRW Holdings (NWH) upgraded to buy from overweight at Jarden; Price Target: $3.25 from $2.95
Pilbara Minerals (PLS) retained at underweight at Morgan Stanley; Price Target: $3.35
Qantas Airways (QAN) retained at buy at Goldman Sachs; Price target $8.05
Qoria (QOR) initiated at buy at Jefferies; Price Target: $0.60
Ramelius Resources (RMS) retained at buy at Shaw and Partners; Price Target: $2.33
Stockland (SGP) retained at buy at Citi; Price Target: $5.20
Straker (STG) retained at buy at Ord Minnett; Price Target: $0.89 from $0.86
Santos (STO) retained at outperform at Macquarie; Price Target: $9.20 from $9.10
Westgold Resources (WGX) initiated at outperform at RBC Capital Markets; Price Target: $3.30
Scans
Carl has over 30-years investing experience, helping investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
Get the latest news and insights direct to your inbox
Latest Articles
Evening Wrap: ASX 200 stumbles on rising benchmark yields, RBA minutes hint readiness to hike if necessary
Carl Capolingua · Tue 02 Jul 24, 5:26pm (AEST)
What does Liontown's funding deal tell us about the lithium sector?
Kerry Sun · Tue 02 Jul 24, 4:31pm (AEST)
Latest views on lithium from three major brokers
Carl Capolingua · Tue 02 Jul 24, 1:49pm (AEST)
Get free post-market insights with our Evening Wrap
Create an account to receive our concise, data-driven post-market recap, sent directly to your inbox, every day.
Along with the Evening Wrap, you'll join 100k+ investors who receive our Morning Wrap and Weekend Newsletter.
Subscribe Now Sign Up FreeAlready have an account? Log in
