Home Stocks Australia Australia: S&P/ASX 200 (.AXJO) Profit warnings and downgrades to come?

Australia: S&P/ASX 200 (.AXJO) Profit warnings and downgrades to come?

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Australia: S&P/ASX 200 (.AXJO) Profit warnings and downgrades to come?

The outlook for airline, travel and airport stocks just got decisively darker according to industry experts.

This will have implications for some of our most popular S&P/ASX 200 (Index:^AXJO) (ASX:XJO) stocks such as the Qantas Airways Limited (ASX: QAN) share price, Webjet Limited (ASX: WEB) share price and Sydney Airport Holdings Pty Ltd (ASX: SYD) share price – just to name a few.

The corporate and leisure travel industry is facing multiple headwinds, according to the executive chairman of the Centre for Aviation CAPA, Peter Harbison, reported the Australian Financial Review.

Bad weather ahead for sector

He was giving a speech at an annual conference on Friday where he warned that this is “really, genuinely a watershed moment” for the industry, which is hurt by the falling Australia dollar, declining passenger numbers, high fuel costs and sluggish consumer and business confidence.

We have started to see cracks in the sector with Sydney Airport reporting fewer Aussies going on international trips in its monthly passenger updates, while Virgin Australia Holdings Ltd (ASX: VAH) struggles with rising costs and sluggish demand.

It’s suggested that full-service airlines may have to take a leaf out of the budget airlines playbook and start charging for things they used to provide for free, such as headphones or even putting your cabin luggage in the overhead compartment above your seat.

However, it’s always tricky trying to charge more when customer demand is weakening. I am not sure if this could backfire.

Profit warnings and downgrades to come?

More importantly, one has to wonder if we will see a series of profit warnings coming from travel-linked stocks as this confession season unfolds.

I would have thought that the industry would be the perfect candidate to issue bad news and I don’t think the “Miracle-Morrison” federal election result would do anything for travel as it seems to have done for the housing market.

These are nervous times for Webjet shareholders who are also bracing for potential bad news after its UK partner Thomas Cook run into more trouble, although I think rival Flight Centre Travel Group Ltd (ASX: FLT) won’t be in a much better place.

Overall, the bias in prices is: Upwards.

By the way, prices are vulnerable to a correction towards 6,243.54.

The projected upper bound is: 6,564.20.

The projected lower bound is: 6,351.23.

The projected closing price is: 6,457.71.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 66.9401. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 61.92. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 2 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 65. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -4.100 at 6,451.900. Volume was 30% below average (neutral) and Bollinger Bands were 30% wider than normal.

Open High Low Close Volume___
6,455.8006,464.6006,447.6006,451.900 436,666,784

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 6,410.38 6,280.12 6,040.19
Volatility: 14 11 14
Volume: 609,091,712 597,040,064 615,778,752

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 6.8% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 27 periods.

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