Buy Write on NCM
April 8th, 2009 by Neil Gynther
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 7789.56 | -186.29 | -2.3% |
| NASDAQ | 1561.61 | -45.1 | -2.8% |
| S P 500 | 815.55 | -19.93 | -2.4% |
| FTSE 100 | 3930.52 | -63.02 | -1.6% |
| Nikkei 225 | 8832.85 | -25.08 | -0.3% |
| SPI Futures | 3654 | -86 | -2.3% |
| All Ords | 3,648.00 | -47.9 | -1.3% |
| Oil | 49.13 | -1.97 | -3.9% |
| Gold | 883.3 | 10.5 | 1.2% |
| Silver | 12.21 | 0.1 | 0.8% |
| Aluminium | 1426 | -22 | -1.5% |
| Copper | 4309 | -21.5 | -0.5% |
| Lead | 1315 | 3 | 0.2% |
| Nickel | 10585 | -215 | -2.0% |
| Tin | 10860 | -215 | -1.9% |
| Zinc | 1320 | -21 | -1.6% |
U.S. stocks were weaker as the Dow Jones Industrial Average fell 186.29 points, or 2.34%, to 7789.56, for its second straight decline. Investors showed trepidation ahead of aluminium maker Alcoa's kickoff of the first-quarter earnings season. Alcoa posted a first-quarter operating loss of 59 cents a share, wider than the average analyst estimate, because of what it called a "historic drop" in aluminium prices and industrial demand.
The Australian market today will open weaker as profit taking should be the main consideration on most traders’ minds. The market has shown signs of hitting a resistance level around 3750 on the XJO and the Dow Jones Industrial had its second consecutive down day. This maybe our last run at the 3400-3500 XJO for a while so look to add to your portfolio once we have found support at these levels. For those Clients that feel the market still has legs on the upside and you don’t want to miss out on the upside potential, look to take a small positions in bought calls on those stock you like.
NCM
A strong Balance Sheet with full exposure to Gold and Copper prices, with Gold retreating back to around the $880 an ounce (significant support level) we are looking for a strong bounce in the commodity over the next couple of months, potential target back above $1000 an ounce. Furthermore with Newcrest’s gearing below 10% at current commodity levels and project capital expenditure funded by internal cash flow, the future for Australia’s largest Gold miner looks very bright.
Technically we feel NCM is well supported between $27-$28 and with a lot of uncertainty about the market, the price of gold should head higher as it is a flight to security for many investors. Targets for the stock over the next month is back at $32, a gap fill on the daily chart.
The main risk that we can foresee is that Gold prices keeps falling. This is only a short term concern as market uncertainty will set in and Gold prices will bounce once again.
MARKET STRATEGY
Peter, myself and the Brokers had an excellent discussion yesterday on where we think the market is heading. After analyzing data, trends and commentary we are still of the opinion that the recent rally has been too much and too fast. We believe that the index will retreat to the 3400 to 3500 level, probably over the next week. We are advising clients to remain in cash until this correction has occurred.
If you are currently holding stock you should be writing your April position NOW. If you have cash, be patient but, as Lawrence has said above, if you disagree and think this market is going to keep rising then buy some Calls in either the stock or the Index. Be aware that the full price you pay for Calls is what you can lose if the market falls.
We have identified some stocks that we believe are good value for the Buy/Write client and one of those, Newcrest, is included today.
Should you have any questions regarding the above please call me anytime.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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