Monday, Nov 06
October has been a good month for the FTSE100, with the Index having moved 2.67% on the month from the lows at 7170 to the highs at 7567. Overall the index continues to trade in a large range between 7100-7567 points.
Since hitting the most recent low at 7193 in September, the index has continued to push forwards towards resistance and has made new highs on a closing basis this month. However, the index remains shy of setting new all time highs on an intraday basis. The index has paused for breath in recent sessions as we consolidate below the all-time high level and resistance at around 7565. It remains to be seen what the next decisive move will be. We could either see a bullish flag complete on a break to new highs or a deeper correction. Overall we remain bullish, but cautious.
See the PDF below for the full, original report with graphs.
1. Buy – Croda International (CRDA)
Croda International plc is the holding company for a group of companies that manufacture a diverse range of chemicals and chemical products, including oleochemicals and industrial chemicals. Croda supplies its items to companies that specialize in the personal care, pharmaceutical, plastics, food processing, nutrition, fire prevention, engineering, and automotive industries.
The long term trend in Croda is very impressive with any meaningful corrections typically being bought. The shares have recently broken from a consolidation pattern to form a wedge. This should lead to a retest of the previous all time highs and then a continuation of the long term uptrend. We continue to recommend buying pullbacks to the long term uptrend line.
Croda was in the news recently as it opened a new facility in the US. The first manufacturing site of its type in the US capable or producing 100 percent renewable and bio-based non-ionic surfactants, which are active emulsifying agents used in a wide range of consumer products. In their most recent results adjusted pre-tax profits were up 14.3% from a year earlier and confirmed the full year outlook.
2. Buy – Just Eat (JE.)
Just Eat PLC provides online marketplace for restaurant delivery. The Company offers online takeaway ordering services that allows consumers to search for and order in real-time from their local takeaway restaurants. Just Eat operates worldwide.
Just Eat shares are trading in a neat bullish channel on the weekly chart. This channel continues to contain the price action over the long time. We expect the sequence of higher highs and higher lows to persist and therefore believe a move towards 800p is very possible over the medium term. We continue to recommend buying on pullbacks towards support.
Since floatation in 2014 at 260p the shares have surged above 700p. The company has delivered revenues of 157m, 248m and 376m in the past 3 years which is a compounded annual growth rate of 55%. Just Eat are well placed to acquire smaller rivals, and is soon to complete a takeover for HungryHouse. Results released in July showed the momentum continuing, with orders up 24%, revenue climbing 44% and adjusted earnings per share rising 39% to 7.8p
BUY ON SETBACKS - TARGET 800p
3. Buy – Premier Oil (PMO)
Premier Oil plc is an independent UK oil company with gas and oil interests in the UK, Asia, Africa and Mexico. It is devoted entirely to the 'upstream' sector of the industry - the exploitation of oil and gas - as opposed to the 'downstream' refining and retail sector. It is listed on the London Stock Exchange.
Premier Oil is in the process of forming a base on the daily chart, which will complete on a break above 68p. Reversal patterns like this are typically very powerful and often indicate significant upside potential. In this instance the measured move of the formation targets a move towards 93p. Until 68p is broken on the upside expect more sideways action. We expect an explosive move higher on an eventual break of this level.
Premier Oil’s catcher project in the North Sea has recently installed crucial floating production equipment ahead of winter. The company is relying on Catcher to boost its production by 60,000 barrels of oil a day by the end of the year. The company has managed to reduce its net debt to $2.74bn at the end of June, but Catcher is likely to accelerate its debt repayment plans. City analysts are forecasting a big jump in EPS in 2018 to 15.9p, followed by 22.7p for 2019.
BUYING PULLBACK - TARGET 62p
4. Buy – Tullow Oil (TLW)
Tullow Oil plc explores for and produces oil and gas. The Group's assets are in Africa, Europe, South America and Asia.
The shares completed a large bottom pattern on the breakout in late September. This saw the shares spike to 200p before consolidating and retreating towards the breakout level of 180p. So far, the shares have held this level, and clear buying interest has materialised. We expect a move back towards 200p and beyond.
Tullow Oil has recently been upgraded by analysts at Deutsche Bank and reiterated their buy rating with a target price of 210p. Reports out of Nairobi in recent days has suggested that Kenya had signed an agreement for oil pipeline study of which Tullow is set to be a main beneficiary. Tullow now appears to be gaining momentum and debt appears to be coming under control . We believe there is significant upside potential in the shares from here.
5. Buy – United Utilities (UU.)
United Utilities Group manages and operates the regulated electricity distribution, water, and wastewater networks in North West England. The Company also manages other infrastructure assets in the United Kingdom and overseas.
The long-term trend of United Utilities is quite impressive, with corrections typically attracting buyers. The latest correction is threating both the long term uptrend and horizontal support at around 800p. Its make or break on the charts around current levels. We are favouring the long term trend and believe the recent correction has created some value in the shares. We do not expect this to be ignored by investors for much longer.
In the September update United Utilities announced they were trading in line with its expectations and that first half profits would be higher that the same period a year previous. The next set of results are due on November 22nd. The most recent broker update was from AlphaValue on the 29th September where they upgraded the shares to ‘Add’ from reduce.
TARGET 1000p | HIGH 1060p | SUPPORT AT 825p | DIVIDEND YIELD 4.6%DOWNLOAD FULL DOCUMENT