When To Buy BHP

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By Michael Gable 

The news yesterday that Lawrence Summers will not run for the position of chair of the US Fed has momentarily pushed our market to new 5 year highs. But with our market outperforming the Dow Jones during August, and volatility coming back into the market the last several weeks, we continue to expect short term risks to be to the downside. The next month will be a hard slog in our opinion for the index itself but we continue to find opportunities in stocks geared towards a recovery. Last week it was Leighton Holdings ((LEI)) and Macquarie Group ((MQG)) which are doing very well, and this week we have found a few more. With some of the heavyweight stocks likely to come under pressure though in the short term, any weakness is an opportunity to get set for the longer term. One such stock is BHP Billiton ((BHP)) where this week we have a look at its longer term prospects and where the buy zone is for investors.

BHP Billiton

With the divergence shown on BHP across April-June, there was going to be a high probability that BHP would find good support above $30. The rally across June-July was fairly impressive for a stock like BHP but we can see that the last $2 of the move was on low volume and probably a case of retails investors jumping in with a fear of missing out. Since then the share price has come off. The recent move up in BHP from late August was done in 3 waves which is normally a countertrend move. This implies that we could see BHP come back to levels as low as $34 at some point which would be the ideal entry point. The stock looks well supported so after pulling back to $34, we expect BHP to try to retest $40 at some point in the next 6 months.
 

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Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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