ANZ Bank Shares Targeting $32

This story features ANZ GROUP HOLDINGS LIMITED. For more info SHARE ANALYSIS: ANZ

Bottom Line

    20/12:
    Daily Trend: Up
    Weekly Trend: Up
    Monthly Trend: Up
    Support Levels: $25.78 / $21.86
    Resistance Levels:  $31.37/ $32.00 / $37.25

Technical Discussion

    ANZ Bank ((ANZ)) is one of Australia's "Big 4" offering a range of banking and financial products to retail, corporate and institutional clients. Whilst ANZ is best known in Australia and New Zealand, it has a significant business in Asia. In July 2014, the company completed the sale of ANZ Trustees Ltd to Equity Trustees Ltd. For the six months ending the 31st of March 2016 interest income decreased 2% to A$15.09B. Net interest income after loan loss provision increased less than 1% to A$6.66B. Net income applicable to common shareholders decreased 22% to A$2.74B. Broker/Analyst consensus is currently “Hold”.  The company pays a dividend of 5.4%.
     
    Reasons to be more optimistic:
    → Improved credit quality and steady revenue trends.
    → Restructuring remains a focus.
    → The mortgage pricing war appears to have eased with discounting reduced.
    → There are still question marks regarding the dividend being maintainable.
    → Management focusing on returns as opposed to growth.
    → The company has re-priced investor loans by eight basis points.

    The banks have been looking much better over the past few months with price breaking higher out of a large triangle basing pattern on this particular chart. Indeed, the same pattern is evident on the chart of CBA. It is worth reiterating that extremely large consolidation patterns like the one shown here can just as easily prove to be reversal setups although textbooks will tell you otherwise. We must also take into account the fact that the recent low completed almost exactly at the 61.8% retracement zone of the prior leg higher. This again adds weight to the more bullish case. Either way, we couldn’t have asked for anything more with price breaking higher out of the small pennant we were focusing on back in November. Our initial target was the typical retracement zone which is exactly where price currently sits. However, we had a higher target zone in place which incorporated the measured move out of the triangle. We still believe those higher levels will be achieved next year. Technically, there is bearish divergence in place on both the daily and weekly charts although it’s now the less significant Type-B variant. Should price continue higher over the next couple of days then the divergence is unlikely to be significant which of course would be the ideal situation. Zooming into the more recent price action shows that today price broke higher out of a small pennant that could well be that target area is going to come under pressure sooner rather than later. We must keep our feet firmly on the ground over the longer term but for the moment we couldn’t ask for anything more with impulsive price action starting to show.

Trading Strategy

    “…The strategy is to buy following a push through the upper boundary of the pattern meaning a break above today’s high at $28.07 would be reason to jump on. The initial stop should be placed just beneath last Thursday’s low at $27.01…”  We currently hold long positions at $28.08 but although price is heading in our favour, we’ll leave our initial stop in place for the moment to allow room to breathe. We’ll also continue to run with a trailing stop as opposed to a set target, although as mentioned last time there is scope to head up toward the measured move out of the triangle around $32.00 which is an area where we’ll be looking to reduce risk. If you aren’t already involved it’s best to stand aside for the moment.
     
    Disclosure: Nick Radge holds
 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms