Evening Wrap: ASX 200's weekend woes far less painful considering melt-up in lithium, critical metals stocks

It wasn't a great day for the benchmark S&P/ASX200.

But, who cares!?

1. It's the weekend 💃

2. Dozens of previously beaten down lithium and critical mineral stocks went bonkers 🚀

(As in, you won't believe some of the (hmmm...dare I say, junk) that went up today!)

On that mysterious and intriguing note...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 66.9 points lower at 7,814.4, 0.59% from its session high and just 0.05% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by a dismal 67 to 233.

For the week, the XJO finished up 65.4 points or 0.8% higher. It closed 1.29% above the week’s low and 1.09% below the week’s high.

It was an easy task identifying the best performing sector today – it was the only one of the eleven major ASX sectors that was up! The Materials (XMJ) (+0.39%) sector was aided by rising base metals prices, particularly copper (see ChartWatch for in depth technical analysis), but you'll notice an odd skew towards lithium stocks.

I say odd because lithium prices have generally been falling this week, touching two-month lows on Wednesday. I suspect it has something to do with the continued flow through of budgetary good vibes relating to support for critical metals funding (and perhaps a touch of short covering too).

The top materials sector stocks today

Doing it tough today? Let’s first point out yesterday’s top trio, the interest rate sensitives of Information Technology (XIJ) (-3.1%), Real Estate Investment Trusts (XPJ) (-1.7%), and Consumer Discretionary (XDJ) (-1.2%), were either at or very near the bottom of the sector performance list.

Market rates did pop up a touch last night, but hardly enough to explain the about face here. It’s Friday, it was just one of those days the Aussie market tends to have any time after it looks so tantalisingly good. 😭

Energy (XEJ) (-%) deserves a special mention here, because missed out on yesterday’s big gains, and it also missed out today. As Warnie/Joe the Cameraman would say, “Can’t bowl, can’t throw!”.

ChartWatch

High Grade Copper COMEX

Supply manifests itself in the candles in two possible ways

I last covered copper in the ChartWatch in Monday’s Evening Wrap. I noted at that time the demand-side was probing the 4.73 point of supply, and if managed to clear it, the next point of supply at 5.03 would come into play. Looking at the above chart, that call seems to have been reasonably accurate.

The zone between 5.033-5.212 is shaping up as an important area of supply. Remember, supply manifests itself in the candles in two possible ways: black bodies, and upward pointing shadows.

Three long shadows on Tuesday’s, Wednesday’s, and Thursday’s candles suggests 5.03 is a hotbed of supply right now. But they also indicate supply has been probed three times – which assuming there isn’t a never-ending pool of supply at 5.03, means it has potentially been weakened.

The candles will guide us from here, as they always do. A close above the top of Wednesday’s shadow high of 5.128 suggests supply has been dispensed with. I would caution against getting too optimistic in this scenario given the proximity of the next major point of supply at 5.212 (from the weekly chart not shown).

Looking at demand, 4.695-4.731 is now the key demand zone. Dynamic support from the short term uptrend ribbon is likely to coincide with this area very soon – reinforcing its credentials.

As long as the copper price continues to print rising peaks and rising troughs and close above the demand zone identified the short term uptrend remains intact.

Make no mistake – we are at a major pressure point here – those shadows could indicate the start of a topping process which could halt copper’s advance for some time. One or two more long upward pointing shadows into 5.033-5.212 would be dangerous for the demand-side.

A long black bodied candle would confirm the supply-side has retaken control.

So, “alert (suggest super alert) but not alarmed” is the best way to go here.

Nickel - LME Official Cash

Welcome back to long term uptrend status nickel, it's been a while

I introduced this chart in the ChartWatch in Tuesday’s Evening Wrap. I noted at that time Nickel’s recent price action was doing a very good impression of changing its long term trend.

Thursday’s close above the 19180 point of supply means its more than just an impression now. It confirms for me that the long term trend ribbon has transitioned from a zone of dynamic supply to a zone of dynamic demand.

Therefore, as far as I’m concerned, a new long term uptrend in the nickel price has begun.

I’m not sure if the Nickel price will be all rocket ship emojis from here, though – perhaps more of a steady grind higher. I say this because there’s a batch of well-defined points of supply about to come into play, starting with 19685, and followed by 20900, 22355, and 23140.

Still, if you have any nickel stocks in your portfolio, the improving technical picture here is no doubt a welcome development.

As long as the nickel price keeps printing rising peaks and rising troughs, and as long as it keeps closing above the short term trend ribbon, I can’t see any reason why the present recovery can’t continue.

Economy

Today

• 12:00 CHN 'Data Dump' (better/worse than expected = 👍/👎 )

  • New Home Prices -0.58% mom in April vs -0.34% mom in March 👎

  • Industrial Production +6.7% in April vs +5.5% forecast and +4.5% in March 👍

  • Retail Sales +2.3% in April vs +3.7% forecast and +3.1% in March 👎

  • Fixed Asset Investment +4.2% in April vs +4.6% forecast and +4.5% in March 👎

  • Unemployment Rate 5.0% in April vs 5.2% forecast and 5.2% in March 👍

  • Takeaways: property woes continued, consumers remain subdued, while manufacturing sector continues its pick up

• In other important China economic news, the PBoC dispensed with the floor on mortgage rates for first and second homes, it has also lowered the minimum down-payment for first-time buyers to 15%, and for second home buyers to 25%

Chinese stocks are still on the mend after a withering bear market through 2023

Latest News

Interesting Movers

Trading higher

• +16.9% Talga Group (TLG)

  - NEWS

• +14.8% Winsome Resources (WR1) - No news, generally stronger lithium sector today, bounced off short term uptrend ribbon, long term trend is transitioning from down to up 🔎📈

• +13.9% Vulcan Energy Resources (VUL) - Launch of Final Phase of Project Level Financing Process, generally stronger lithium sector today, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +10.9% Latin Resources (LRS) - No news, generally stronger lithium sector today, bounced off short term uptrend ribbon, rise is consistent with prevailing long term uptrend 🔎📈

• +10.4% Sayona Mining (SYA) - Yes, even Sayona was up today. No news.

• +9.4% Lake Resources (LKE) - Ok, now this is getting ridiculous! No news.

• +8.2% Bendigo and Adelaide Bank (BEN) - Trading Update, rise is consistent with prevailing short and long term uptrends 🔎📈

• +7.2% Syrah Resources (SYR) - No news, good critical minerals vibes

• +6.5% Core Lithium (CXO) - Ridiculous squared (or is it cubed?). No news.

• +5.9% Mesoblast (MSB) - No news, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +5.3% Clarity Pharmaceuticals (CU6) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.9% Chalice Mining (CHN) - No news, good critical minerals vibes, rise is consistent with prevailing short term uptrend, rising peaks and rising troughs 🔎📈

• +4.9% Liontown Resources (LTR) - No news, good critical minerals vibes, rise is consistent with prevailing short term uptrend, rising peaks and rising troughs 🔎📈

Trading lower

• -13.1% Dicker Data (DDR) - Q1 FY24 Market Update, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -7.8% Weebit Nano (WBT) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• -6.9% Cettire (CTT) - No news, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -6.3% Nanosonics (NAN) - No news, fall is consistent with prevailing long term downtrend, closed below short term uptrend ribbon 🔎📉

• -5.7% Australian Clinical Labs (ACL) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

Broker Notes

• Audinate Group (AD8) retained at overweight at Morgan Stanley; Price Target: $22.00

• Aristocrat Leisure (ALL)

  • Retained at buy at Jarden; Price Target: $47.20

  • Upgraded to hold from underperform at Jefferies; Price Target: $41.15 from $36.56

  • Retained at overweight at JP Morgan; Price Target: $50.00 from $46.00

  • Retained at outperform at Macquarie; Price Target: $50.50 from $49.00

  • Retained at overweight at Morgan Stanley; Price Target: $49.50 from $46.95

  • Retained at hold at Ord Minnett; Price Target: $48.00

• AMP (AMP) initiated at neutral at Macquarie; Price Target: $1.16

• ANZ Group (ANZ)

  • Retained at underperform at Macquarie; Price Target: $26.50

  • Retained at equal-weight at Morgan Stanley; Price Target: $27.80 from $27.70

• Alumina (AWC) retained at neutral at Macquarie; Price Target: $1.40

• Bendigo and Adelaide Bank (BEN) retained at underperform at Macquarie; Price Target: $8.50

• Black Rock Mining (BKT) retained at outperform at Macquarie; Price Target: $0.25

• Bank of Queensland (BOQ) retained at underperform at Macquarie; Price Target: $4.75

• Commonwealth Bank of Australia (CBA)

  • Retained at underperform at Macquarie; Price Target: $95.00

  • Retained at underweight at Morgan Stanley; Price Target: $94.00

• Cobram Estate Olives (CBO) retained at buy at Shaw and Partners; Price Target: $2.05

• CSR (CSR) retained at hold at Ord Minnett; Price Target: $9.00

• Graincorp Class A (GNC)

  • Retained at buy at Bell Potter; Price Target: $9.50 from $9.20

  • Retained at outperform at Macquarie; Price Target: $9.24 from $9.02

• G.U.D. Holdings (GUD) retained at hold at Ord Minnett; Price Target: $12.00

• Helia Group (HLI) retained at neutral at Goldman Sachs; Price Target: $4.53

• Hotel Property Investments (HPI) retained at hold at Ord Minnett; Price Target: $3.40

• Hub24 (HUB) retained at buy at Citi; Price Target: $42.80

• IDP Education (IEL) retained at buy at Goldman Sachs; Price Target: $25.30

• IPD Group (IPG) retained at buy at Bell Potter; Price Target: $5.70 from $5.90

• Incitec Pivot (IPL)

  • Retained at buy at Goldman Sachs; Price Target: $3.35 from $3.25

  • Upgraded to overweight from neutral at Jarden; Price Target: $3.15 from $2.75

  • Retained at hold at Jefferies; Price Target: $3.00

  • Retained at neutral at JP Morgan; Price Target: $3.10 from $3.00

  • Retained at equal-weight at Morgan Stanley; Price Target: $3.00

  • Retained at buy at UBS; Price Target: $3.40 from $3.21

• Arcadium Lithium (LTM) retained at outperform at Macquarie; Price Target: $9.40

• Lynas Rare Earths (LYC) retained at outperform at Macquarie; Price Target: $7.00

• Meteoric Resources (MEI) retained at outperform at Macquarie; Price Target: $0.46

• National Australia Bank (NAB)

  • Retained at underperform at Macquarie; Price Target: $32.50

  • Retained at equal-weight at Morgan Stanley; Price Target: $32.50 from $31.50

• Netwealth Group (NWL) retained at sell at Citi; Price Target: $18.65

• Piedmont Lithium Inc (PLL) retained at outperform at Macquarie; Price Target: $0.36

• PSC Insurance Group (PSI) downgraded to neutral from buy at UBS; Price Target: $6.19 from $5.40

• REA Group (REA) retained at overweight at Morgan Stanley; Price Target: $220.00 from $210.00

• Rio Tinto (RIO) retained at neutral at Macquarie; Price Target: $121.00

• Renascor Resources (RNU) retained at outperform at Macquarie; Price Target: $0.25

• South32 (S32) retained at outperform at Macquarie; Price Target: $3.90

• Sayona Mining (SYA) retained at neutral at Macquarie; Price Target: $0.04

• Syrah Resources (SYR) retained at outperform at Macquarie; Price Target: $0.90

• Talga Group (TLG)

  • Retained at buy at Bell Potter; Price Target: $2.35

  • Retained at outperform at Macquarie; Price Target: $2.00

• Westpac Banking Corporation (WBC)

  • Retained at underperform at Macquarie; Price Target: $26.00

  • Retained at underweight at Morgan Stanley; Price Target: $24.50 from $24.40

• Xero (XRO) retained at overweight at Morgan Stanley; Price Target: $125.00

Scans