Minor reversals in equity and commodity markets stress the significance of Friday’s trading action.
After significant advances in commodity prices and declines in U.S. equity markets Friday, one may have expected that profit-taking would be a focus of today’s trading action. While some of this may have occurred, today’s trading also appears to have reinforced the sentiment signals sent by Friday’s market activity.
For example, crude oil, which soared on Friday, has consolidated today, but it has held above $135/bbl, its previous resistance level. This suggests that crude’s underlying uptrend and new $147.50 price objective based on the previous trading range remain intact.
Similarly, the Dow Industrials (US30 CFD) attempted to rebound earlier today, seemingly due to new U.S. home sales data. Pending home sales increased by 6.3% in April, well above the 0.4% decline that had been expected and the 1% decline reported for March. Despite this news, the US30 appears to have encountered resistance below the 12,350 support level that was broken Friday, which suggests that a new downleg may be underway. Similarly, a rally attempt in the NASDAQ 100 (NDAQ100 CFD) appears to have quickly fizzled and with the NDAQ100 taking out Friday’s low, it appears downward momentum continues to build. Next support levels appear near 12,000 for the US30 and 1,940 for the NDAQ100.
Canadian equity markets, meanwhile, appear to still be benefiting from their resource weighting with the S&P/TSX Composite back above 15,000 and the S&P/TSX 60 challenging resistance at 905.
Investors should also note that base metals and grains also appear to be surging with copper up 2.3%, aluminum up 2.0%, corn up 2.1%, and wheat up 1.1%.
Canadian share update: Shore shipwrecks on a mixed day for resource equities, Allen-Vanguard attempts to rally again
Resource sectors in Canada appear to be heading in different directions this morning with energy and fertilizers advancing and precious and base metals declining. The advance in the energy group led by Oilexco (TSX: T.OIL, Stock Forum), up 4.2%, and Paramount (TSX: T.POU, Stock Forum), up 3.4%, suggests that while crude may consolidate after Friday’s big move, investors believe that the underlying trends for energy prices remain positive. Meanwhile, with grain prices rallying again, fertilizer producers appear to have attracted renewed attention with Potash (TSX: T.POT, Stock Forum) up 3.5% and Agrium (TSX: T.AGU, Stock Forum) up 2.3%.
With the exception of Thomson Creek (TSX: T.TCM, Stock Forum), which has rallied 4.2% in early trading, metal miners appear to be under pressure today with Breakwater (TSX: T.BWR, Stock Forum) down 7.2%, Centerra Gold (TSX: T.CG, Stock Forum) down 5.8%, and Harry Winston (TSX: T.HW, Stock Forum) down 2.7%.
Shore Gold (TSX: T.SGF, Stock Forum) broke down through $3.00 for the first time since last summer and has been testing the key $2.90 level. Sentiment appears to have turned against the diamond explorer after it released a new resource report for its Star Kimberlite in Saskatchewan, which estimated an indicated resource of 122.7 million tonnes grading 13.6 carats per hundred tonnes (cpht) and an inferred resource of 30.3 million tonnes grading 13.1 cpht. It is possible that some investors may have been disappointed by management comments which indicated that 100 million to 120 million possible tonnes of ore that had been included in a model released in 2006 remain at the conceptual stage and could not be included in the resource estimate. While further exploration is planned, management noted that it is uncertain if this area may be upgraded to a resource which could have disappointed some investors.
Defense electronics producer Allen-Vanguard (TSX: T.VRS, Stock Forum) has rallied 8.7% this morning after announcing that it has received a $35 million order in addition to the $10 million order it received on Friday. While Friday’s rally attempt appears to have been impacted by overall equity market conditions, another challenge of resistance at $2.75 appears to be underway today. A breakthrough there would suggest recent base building has been completed and a new recovery trend may have commenced with initial resistance possible in the $3.00 to $3.20 range.
Upcoming free seminars
In the coming weeks, Colin Cieszynski will be making a number of free presentations for accredited investors across Canada.
Location Date Time Topic
Vancouver June 15 1:00 pm PT Sector Rotation and Pairs Trading
Strategies in Resource Markets
For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at http://www.cmcmarkets.ca/en/content/education/free_seminars.do
Upcoming educational webinars
In the coming months, Colin Cieszynski will be presenting a series of free webinars on trading for accredited investors from coast to coast.
Date Time Topic
June 10 7:30 pm ET Developing a Trading Strategy 2: Risk Management
Techniques (for CMC Markets clients only)
For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at http://www.cmcmarkets.ca/en/content/education/free_seminars.do
This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.
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