Insights for December 2016

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Rolls Royce shall be avoided for the time being as the company announced on its capital day on 16th November, that a new accounting standard that forbids the acceleration of revenue recognition, will hurt near term results at Rolls-Royce Holdings PLC. However, the analysts feel that the reporting will be more transparent under IFRS 15.

The company finished trading on the London Stock exchange at 675p a share on Tuesday, 27th December. Post the capital market day, the stock reacted negatively to the news on new accounting standard and Rolls Royce fell sharply from 740p to the lows of 635p, a fall of almost 12% in just two days. Currently the stock has been trading below 50 day moving average (DMA), 100 DMA and just a tad above 20 DMA of 701p, 729p and 671p respectively. Rolls-Royce has been trading 35% above the 52 weeks low and 22% below the 52 weeks high. As per the technical analysis and charting techniques, the stock seems to have consolidated at 651p and has been rising since then. However, at the current levels, the stock seems to have tough resistance and an upmove is seen only once the stock breaches 678p successfully. We would advise traders or investors to initiate fresh positions on the stock only if the stock gives a breakout above 678p, otherwise Rolls Royce shall be avoided for some time! (Read more)

Topics: Analysis

BP closes the year with news of one of the biggest deals in the energy sector this year. The British oil companyhas signed a deal which has has made it a shareholder in Abu Dhabi's onshore oil concession, in exchange for which the emirate's oil company gainsownership of a 2% stake in BP. BP obtains, in this way a 10% stake in ADCO, the state-owned Abu Dhabi Company for Onshore Petroleum Operations Limited,the outfit which operates these oil fields. The oil fieldthought to be part of one of the largest oil field concessions in the emirate, and one of the last few big oil concessions available in the Middle East. The total deal is estimated to be worth a total of £1.8 billion ($ 2.2 billion). (Read more)

Topics: Gas, Oil
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Glencore is the leader of a consortium that, together with Qatar's global sovereign fund, Qia, bought a 19.5% stake in Rosneft, the Russian oil company. Rosneft is one of the leading Russian blue chip companies, and the flotation is part of a process to partially privatise the oil company, in a bid to reduce the debt level of the Russian state, hit by the twin storms of falling oil prices amid economic sanctions imposed following events in Crimea and Eastern Ukraine. News of the deal, worth 10.5 million Euros, was welcomed by investors, and sent the Russian stock price shooting up by over 5% on the Moscow stock exchange. (Read more)

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Posted by MaxMarioni on 4 December 2016, 7:34 PM

Commodities and Mining Back Up as Gold Slides

Gold fever is declining. Other raw materials such as industrial metals however, are rallying, suggesting that the long downward cycle that has hit the industry is coming to an end. Goldman Sachs is convinced of this: for the first time in four years, it is urging investors to put their money into commodities. Just look at miners' reversals in performance: AngloAmerican has quietly abandoned its asset disposal plan which was announced only this February, showing that the goal of reducing debt is already on the way to being achieved. In the last months, raw material prices have strengthened, often with double-digit if not triple-digit rises. In the US, following Donald Trump's election to the White House, stocks belonging to the natural resources sectors were the ones who saw the biggest increase amid the post-election rally, with an 11% rise for the Eurostoxx sub-index against 8.3% for the Dow Jones. Since the January lows, Anglo and the other four big mining titles (BHP Billiton, Rio Tinto, Vale and Glencore) have more than doubled their market capitalisation. Also Glencore has stated they will restart dividend payments in 2017. In fact, Anglo and Glencore may soon regain their status as income stocks. But investors looking for a reliable, rising dividend income will remember how easily these payouts were cut. Back in January, it was been a surprise gold rally whichbrought the attention ofinvestors to commodities. But the precious metal, after a brief rally that immediately followed Trump's shock election victory seems to have fallen out of favor. With the Federal Reserve now ready to raise the cost of money, the dollar reaching its highest level in 13 years, and Wall Street churning out new records every week, bullion has lost its appeal among investors.Gold ETFs - which had grown to record-breaking pace in early 2016, are falling without interruption. If gold is losing its shine, its rise during the year to date is still 12%. But the less noble metals are shining brighter: almost all non-ferrous are up by over 20% in 2016, with zinc, nickel, aluminum and tin rising to multi-year highs on the London Metal Exchange. Even copper eventually joined the rally, overtaking the 6 thousand dollars per ton. Even more spectacular is the performance of other industrial commodities, especially those used in the steel industry, such as coke coal, which appreciated by over 300% this year, and iron ore, which has gained more than 60%, reaching the highest since two years.   (Read more)

National Grid should be an avoid for the time being. The stock has had a massive fall in the past few months and it seems that the stock would take time to consolidate. The company announced its half yearly 2016-17 results, a few days back on 10th November. It seems that the latest results couldn’t cheer the investor’s sentiment on the D- street as the stock crashed by nearly 5%, the same day! We would throw a light on the results of the company in the later part of the article.

The stock finished trading on the London stock exchange at 898p a share on1st December. The stock has been trading below its 20 day moving average (DMA), 50 DMA and 100 DMA of 957p, 1023p and 1050p respectively.  A few days back, National Grid was trading between the channel of 928p-970p and yesterday it went below the channel too. Therefore, the bearishness would be expected to continue and the stock may head towards fresh lows also.  Another technical indicator ‘trend line’ also confirms the bearishness of the stock as the stock has been trading nonstop on the downward trend line only! Additionally, huge volumes have been seen indicating towards fresh short positions only. Hence, traders or investors shall completely avoid National Grid plc. for some time till we see any consolidation sign in the stock. (Read more)

Topics: Analysis
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