MORNING MARKET REPORT

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1 FRIDAY, 12 JANUARY 2018 SUMMARY S&P/ASX If you go out in the woods today, you're sure of a big surprise. For the last two-days, the Australian sharemarket has suffered heavy casualties after the benchmark S&P/ASX 200 index extended its second losing streak. Additional weakness was triggered by the negative lead from Wall Street after worries that China will slow or even halt its U.S. government bond purchases. China hit back saying it plans to scale back buying US Treasury s as 'fake news' How does the technical pattern now fit to this bearish scenario? Earlier in the week, we pointed out that increasing negative signals were emerging. The signals were from posted Doji and Long-legged Doji and bearish divergence. Recap - Long-legged Doji? A long-legged Doji is a type of candlestick formation where the opening and closing prices are nearly equal despite a lot of price movement throughout the trading day. This candlestick is often used to signal indecision about the future direction of the underlying asset. Divergence Divergence is a powerful signal. Sometimes a technical indicator will disagree with the actual price direction of the stock you are assessing. MARKET OVERVIEW ASX200 6, % SPI Futures (Mar 18) 6, % S&P 500 2, % Nasdaq 7, % Oil (WTI) $ % Iron Ore $ % Spot Gold US$1, % AUD/USD US % BTC/USD $13, % These disagreements are strong signals and rather useful for the trader/investor. Divergences can be an important warning signal that a bullish or bearish trend is coming near to an end. Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement. So, in this instance, bearish divergence was evident, and is highlighted in the graph beneath. Bear markets One thing history has taught us is that bear markets come fast and furious so caution to the long trade as a bulltrap could easily be laid above 6,150. At present, support (short-term base) is seen from 6,045-50, beneath views 5, Daily outlook on the benchmark S&P/ASX 200

2 In the Markets The Heavyweights Yesterday, the Fab Four (banks) weighed the market with Westpac trading down -0.54% at $ The Commonwealth Bank (CBA) was down -0.38% at $81.30, and ANZ trading lower by -0.24% at $ The National Bank was the only gainer by +0.10% to $ Opposing the bear trend, the local gold miners may add further gains today, after spot gold prices edged higher, overnight. Yesterday, Newcrest Mining (NCM) rose by +0.71, to $22.81, and Evolution Mining (EVN) gained +1.20% to $2.52. Is Syrah Resources technical buy? The heavily-shorted graphite miner, Syrah Resources (SYR) hit a speed bump earlier in the week, after its plans to develop a beneficiation plant in Louisiana, would have given it better access to lucrative battery markets. Yesterday, prices fell to $4.41 low. The technical outlook views the uptrend at $ , which should indicate that fresh technical buying may only be around the corner for this share if this trend holds. It is expected that while traders try to shake-off concerns that led to Wednesday s declines, it is envisaged they may struggle to find fresh reasons to extend the rally that took stocks to or near record highs earlier this week. What appears to be driving the markets is that equities and investors have continued to price in the potential gains from tax reform. The Dow Jones Industrial Average gained 0.59%, to 25,517.70, the S&P 500 was up +0.55%, to 2, and the Nasdaq Composite was up marginally to +0.66% to 7, In other news - North American Free Trade Agreement (NAFTA) or pull out: Mnuchin Steven Mnuchin, the U.S. treasury secretary, said on Thursday that he expects the United States to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico or to pull out of the deal. "Ambassador (Robert) Lighthizer is doing an amazing job renegotiating NAFTA, and we expect that will be renegotiated, or we'll pull out," Mnuchin told journalists. Another day for the Bulls and Bears Wall Street US equity benchmarks were slowly reversing Wednesday's declines to trade acceptably higher overnight helped by a buoyant energy sector, which was benefiting from the rally in oil prices, and higher industrials. In the previous trading day, the S&P 500 and Nasdaq snapped a six-day winning streak, both closing lower as investors fretted over the possibility of China halting its Treasury bond purchases, and the U.S.' future involvement in NAFTA. (Update - China hit back saying it plans to scale back buying US Treasury s as 'fake news. ) Crude Oil Prices Settle Near 3-Year Highs as Rally Continues Crude oil prices settled near three-year highs overnight amid expectations that global oil demand growth and ongoing OPEC cuts would continue to reduce excess supplies. Also supporting oil prices was Wednesday s bullish inventories data showing an unexpected drop in US production and larger than expected draw in US crude oil supplies. Inventories of U.S. crude fell by roughly 4.95 million barrels for the week ended Jan. 5, beating expectations for of a draw of 3.44 million barrels.

3 The technical view At present, our concerns remain to the overbought technical pattern. However, for the moment, the bulls still appear determined to take prices higher. The next resistance for U.S. West Texas Intermediate crude (WTI) is at $64.40, then a target of $ Look out bears; the Iron ore bulls are closing in on $80 a tonne mark! Iron ore spot markets rallied on Thursday, hitting the highest level in close to five months. Since the rebound, gold prices still look to the near 4- month highs Gold prices rose back above $1,320 per ounce against a weakening US Dollar overnight. By the initial strength seen from crude oil prices hitting a three-year high. With the recent pullback being shallow, the broader term technical posture remains bullish. At present, the short-term call was for a bearish correction. However, since the recent weekly low of $1,308 (support) rebound (rejection), prices have remained initially firm. As the technical implications easing out of the overbought condition, along with the base holding from $1,298 to $1,308 could see the broader view take a bullish course correction, and stage a strong rally to the region of $1,345 to $1,375 an ounce. That should spark renewed interest in precious metals and flow on to local companies like: Newcrest Mining Ltd (NCM), Evolution Mining Ltd (EVN), St Barbara Ltd (SBM), Resolute Mining Ltd (RSG), Regis Resources Ltd (RRL), OceanaGold Corporation DRC (OGC), Australian Pacific Coal Ltd (AQC), Saracen Mineral Holdings Ltd (SAR), Dragon Mining Ltd (DRA), Millennium Minerals Ltd (MOY). Elsewhere, in other precious metal trade, silver futures fell modestly by 0.35% to $16.98 a troy ounce, while platinum futures rose 1.07% to $ Copper fell 0.14% to $3.23, while natural gas 5.51% to $3.06 following storage data showing natural gas stockpiles fell more than expected. However, with futures down heavily in overnight trade, it looks like those moves may be reversed in the session ahead. According to Metal Bulletin, the price for benchmark 62% fines rose 1% to $79.08 a tonne, leaving it at the highest level since August 22. It has now rallied 35% from the end of October, in line with a similar move in Chinese steel markets. Trade will resume in all contracts at midday AEDT, around an hour or so before the release of Chinese international trade data for December, a report that will include both iron ore imports and steel exports. The Australian Dollar preserves intraday gains Bull's eye US as the greenback weakens Yesterday s bullish traction was triggered by the betterthan-expected data from Australia retails sales release. The data increased by 1.2% in November following October's 0.5% growth and beat the market expectation of 0.4%. Today, the market will be looking to China s release on the trade balance data. A positive reading could provide an additional boost to the pair during the Asian session. The key level holds from US The pair is currently trading around US cents.

4 Cannabis stocks are starting to look smoking hot! Last week, the federal government gave the green light for medicinal cannabis companies to export, causing listed cannabis stocks to soar. In a statement from Health Minister Greg Hunt, he said allowing export licenses for medicinal cannabis products would improve the viability of domestic producers, thus securing supply for Australian patients, by strengthening the opportunities for domestic manufacturers. The news was well received by the ASX listed cannabis companies and investors alike, sending share prices in those stocks higher. Due to popular demand, this week s smoking hot stock pick! MARKET MOVERS Company Last Price Buy / Sell Price Target Confidence BOT $0.081 B $0.14 MDC $1.08 B $0.96 MMJ $0.55 B $0.72 ZLD $0.11 B $0.16 TPE $2.38 B $2.94 CPH $1.065 S $0.85 IMC $0.24 S $0.12 MXC $0.098 S $0.07 Biggest risers - Immuron Limited (IMC) ($0.24, up %) Biggest fallers - MMJ Phytotech Ltd (MMJ) ($0.55, down %) The Bulls Stocks tipped to rise Botanix Pharmaceuticals Ltd (BOT) ($0.081, flat 0.00%) From the daily technical implication, further demand is expected to emerge since establishing a base of $0.04. This stock has the potential to further gains and aim for the region of $0,14. Medlab Clinical Ltd (MDC) Target reached at $0.96, next $1.14 ($1.08 up +4.85%) Our target was reached on Wednesday at $0.96. With renewed buying interest looming could now see a move to $1.14. MMJ Phytotech Ltd (MMJ) ($0.55, down %) Since the bull-run was ignited from $0.40, it is envisaged that this share will continue to climb to the region of $0.72, with any renewed pullback seen as a potential buy from $0.45. Zelda Therapeutics Ltd (ZLD) ($0.11, flat 0.00%) The direction of this stock is expected to remain northbound with a plausible target viewed at $0.16, or even scope to $0.26 to $0.32. Reassess from there. Support comes in at $0.08.

5 TPI Enterprises Ltd (TPE) ($2.38 down 0.83%) The call for TPE holds to $2.66. However, if the dynamics are bullish (than its anticipated), we could eventually see a potential target of $2.94! Any pullback should encounter demand from the region of $2.28. The Bears Stocks tipped to fall Creso Pharma Ltd (CPH) ($1.065, up +2.40%) A pullback is first seen, before the initial buy! This share has struggled to recapture it full bullish potential since the rebound from $0.78. From Friday s rejection of the $1.38 highs, it is foreseen that initial selling pressure will commence at the start of this week. This will provide bullish opportunity, as it is envisaged buyers will emerge from the region of $0.98. Immuron Limited (IMC) ($0.24, up %) The weakness was seen first before the rally. This share still has the potential for a bullish breakout. That being said, we first view a pullback to $0.12, before renewed buying commences. A rebound is anticipated to $0.24. MGC Pharmaceuticals Ltd (MXC) ($0.098, down -2.00%) Although we view all our picks as a potential buy, this stock should provide a bullish opportunity from the region of $0.07. As it is anticipated renewed buying strength should eventually increase and provide a rally to aim for the $ area. ECONOMIC CALENDAR Friday, January 12 China is to report on the trade balance. The U.S. is to round up the week with what will be closely watched data on consumer inflation and retail sales. Disclaimer: Kaz Direct s services are provided by Kaz Capital Proprietary Limited ABN Australian Financial Services License No , Level 6, 88 Foveaux Street, Surry Hills NSW For information relating to our financial services you should refer to Kaz Capital s Financial Services Guide. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. There are risks involved in any financial investment and the value of any investment can and does fluctuate and may even become valueless. This research is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. Kaz Capital does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Unless otherwise noted, market and stock price outlook is taken from a technical perspective and seen from the oscillator s pattern being (Stochastic, MACD, RSI, and momentum), with no fundamental influence taken to these views.