Zak Mir – More mining masochism – London Mining, African Minerals & Red Rock Resources

You can tell from the daily chart of London Mining (LOND) just why some people, including myself, very often choose to leave bargain hunting in mining stocks to either the experts – in this case Titan Investment Partners, or those who suffer from a masochistic streak. This probably also includes the company founded by the first editor of Spreadbet Magazine Richard Jennings, but also other less wise heads who have been attempting to bottom fish mining stocks even before precious metals peaked just shy of two years ago.

And how painfully those precious metals bulls were caught out with quaint views regarding the end of the world, end of the Eurozone and the end of low inflation.  Of course, they may be proved correct in the end but, as my old buddy Paul Rodriguez of ThinkTrading reminded us in his interview here a couple of months back, in the end everything happens, even a bond crash, or a London housing market bubble burst. The problem is time, money and patience…

Such a concept of “something bad” happening in the end could be a useful one to swing with as far as bulls of London Mining have been concerned. Here we have not only had more false dawns than a Scandinavian Spring, but it has additionally been a volatile and messy process from a technical / charting perspective as well. A good example of this was the May bear trap rebound from below the former December 110p zone support. Indeed, the shares managed to spend almost all of May back above the old 112p floor of the end of 2012 – long enough to give the impression of acceptance, before unceremoniously beginning a new leg to the downside.

While it should be admitted that the January to March head & double shoulders reversal should have warned us that something nasty was on the way,  I would venture to suggest that we have been looking at overkill here. This is particularly so given the way that for July, we were treated to a double bear trap rebound from below former April support at 97.5p. On this basis, one would probably be best advised to forget about bottom fishing this stock, at least until we see a break of the 200 day moving average currently at 130p. Given how cruel the price action has been in this sector over recent months, one would say it is better to miss the first 10% or 20% of any lasting recovery, rather than risk losing this amount trying to get in at the ground floor and failing.

I think it could also be said that as far as trader bruising is concerned, the  vehicle of London Mining is difficult to beat but, this does not mean we are looking at a trading party as far as African Minerals (AMI) is concerned either. In particular, we had multiple support points for the shares from March through May which did lead to modest upside. Unfortunately, this ended with a narrow bull trap above the former April resistance at 260p plus. In fact, the aftermath of the trap should have warned us of the new failure well below the 200 day moving average. Wide open space between price peaks and a falling 200 day moving average are rarely good news and in this instance remind us it is probably best not to get involved here unless, or until, there is a minimum end of day close above the 200 day moving average – now at 259p.

Perhaps after the moan inducing mining minnows described above, it is best to try and finish on a brighter note. This comes in the form of Red Rock Resources (RRR), where it would appear that salvation – however temporary – may be at hand for the bulls. This is said on the basis of the weekly close back above former April / May support – fractionally below Friday’s close. The close is backed by the extended RSI support line in place on the daily chart since April. While cautious traders may wish to see the 50 day moving average at 0.4p broken as well, if this is see over the next few sessions one would back the shares to retest 0.6p May resistance as a minimum 4-6 week target.