The Future Remains Small: Zak Mir on K3, IQE and Amur Minerals

Having interviewed star fund manager Gervais Williams twice in a week, and noted how his homework on K3 Business Technology (KBT) ties in well with our very own James Faulkner, it seemed churlish not to look at the technical position of this stock and a couple of other small is beautiful situations. All of this is a salute to Mr Williams’ recent publication, The Future is Small, a book that takes the view small / growth plays are likely to excel over the next few years given the economic environment we are in.

Looking at the daily timeframe of K3 Business Technology shares at the moment it can be seen that the overall pattern here for much of the past couple of years has been for a steady progression to the upside. But there is more to say from a technical perspective in the sense that following the breakouts new support has tended to come in at or the well above former resistance. Such charting configurations are only generally seen in the strongest of plays, something which this stock would appear to be from this visual form of analysis.

That said, it has to be acknowledged that at least since March last year we have seen the shares in consolidation mode, something which is quite understandable given the vertical push from £1.50-£2 this time last year. Nevertheless, with the floor of a rising trend channel from August 2013 currently running level with the 10 day moving average at 212p, the situation looks well supported. The view now is that provided is no sustained price action back below 200p level we should be treated to a two-year resistance line projection target as high as £2.90 , something which could be served up over the next 2 to 3 months.

IQE (IQE) is the choice of James Faulkner again. The charting interest is provided by the way that the stock has smashed in near vertical fashion through the 200 day moving average at 19p. This is always a significant technical event, with the implication being that an extended downtrend has finally been broken. The message now is that provided there is no weekly close back below the 200 day line we should see this stock make accelerating progress to unwind the breakdown which started with a topping out over 30p in the summer of 2013. The timeframe on a possible return to the 30p+ area is currently seen as being the next 2 to 3 months with any initial weakness towards the feature regarded as a buying opportunity given the overbought RSI around the 70 level currently.

Finally, I present a company which I interviewed in the middle of last year, and where the imagination of the stock market appeared to have been  captured very soon after. Amur Minerals (AMC) showed its intent in terms of breaking its particular downtrend in late September with a break above the 200 day moving average then around the 4p level. This bullishness is underlined by the test of the 200 day line as new support early November and effectively the stock has not looked back ever since. The vehicle for the ascent has been a rising trend channel starting in September with its floor currently running just above the 80p level. The likelihood now is that, provided there is no sustained price action back below the 50 day moving average at 9.31p, we should see a final leg higher on this move towards the 2014 resistance line projection at 14p plus over the next 6 to 8 weeks.