ASX week ahead 25 January 2010: A dramatic trading week, with the S&P/ASX 200 correcting down by 3.0%. With Treasurer Swan discussing a resources tax of up to 40%, the collapse was led by miners and energy stocks, despite blowout production shipments from Fortescue Metals (FMG), BHP Billiton (BHP), and Lihir Gold (LGL), and an 18% surge in revenue for Woodside Petroleum (WPL). But few were spared as China began draining liquidity despite their accommodative rhetoric, and proposed changes to U.S. banking regulations rocked global financials, with the ASX sector losing 1.6%.

With risk aversion re-entering the market, traders are warned to keep their stops tight to prevent losses and lock in profits. Possible shakers next week include:

Thursday, 28 January: Milton Corporation (MLT) in early December warned that interim operating profits are likely to be 20–23% lower year-over-year, with the dividend remaining at 0.35. The investment company has generally outperformed the S&P/ASX 200, even gaining on Friday as most stocks in the world lost; even after guidance, that could change.

Friday, 29 January: Allied Brands (ABQ) in December forecast a surge of 20–33% in full-year profits. Last year, net income fell 48% despite 33% higher revenues, due to rising cost of goods sold, sending the stock as low as 0.10. A good result could see large percentage returns here.

Hastings Diversified Utilities Fund (HDF) last July had just initiated a nice little rally when the company announced a need to raise capital to retire debt and expand a pipeline. By November the fundraising was complete; however, the stock has not yet recovered from that interruptus, which cut its value by 50% and took it as low as 0.80. With the pipeline infrastructure looking ripe for mergers and acquisitions, Hastings could also be a takeover target.

Dioro Exploration (DIO) spent most of 2009 as a takeover target itself, closing the year dancing still with Ramelius Resources and Avoca, which already owns 44.85% of Dioro and is expected to win the tussle shortly. A merger would create a WA gold producer mining 270K ounces per annum. In addition to the annual general meeting, expect a renewed offer from Avoca soon.

Meanwhile, AMP Limited (AMP) since the previous analysis on 17 December, rose from its long-term bullish trendline to form the right shoulder of a head-and-shoulders formation. From that peak, it has retracted back to the trendline, as shown below:

Traders should watch for AMP to rise again, challenging and breaking the 7.00 level.

Leighton Holdings (LEI) broke from the triangle seen during the first analysis. However, since its high of 41.70, reached 12 January 2010, the slow stochastic shows an incipient downtrend, below:

The short-term channel LEI formed between 34.00 and roughly 38.50 was broken by that surge to 41.70. However, the stock lost momentum and the price action has since fallen back to the upper range, which served briefly as support before giving way. LEI has re-entered that range, below:

technical analysis by Craig Liles

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