Zak Mir – Miners revisited

As I mentioned earlier in the week, after some months of thumbing through Spreadbet Magazine as a ‘mere’ reader and then being forced to write quasi grammatically for the blogs (!), you start to get an idea of what the house line is as far as trading recommendations / ideas are concerned. I am reminded of this, as during my trawling of the AIM stocks arena for bottom fishing candidates, I came across the gloriously named Zanaga Iron Ore Company (ZIOC).

The attraction in this pre production iron ore company, if you are in the mood for catching a falling knife, are the extremely oversold RSI reading and the extended falling wedge (bullish) formation. Perhaps in their own right each factor would not be enough to suggest any bottom fishing but when combined, and in the case of the RSI in particular where it is evident that it is flattening at the lower levels under 20, at a minimum we are likely to see a flat-lining in the stock. This implies that even if this is not the end of the bear run that there would most likely be a dead cat bounce around the corner and which could be profited from. 

As far as the falling wedge is concerned, we are currently nudging the floor of the chart formation – a line of support from January. The worst that would be expected over the next couple of weeks here is sideways to mildly up price action before a new leg down or alternately a snapping of the wedge top to turn this situation around – back to the blue 50 day moving average zone now at just under 16p. I would guess some positive fundamental news would be required on the feasibility study and/or Glencore’s intention with the iron ore field.

Mocing onto the situation at recent Goldman Sachs downgrade (naughty, naughty!) and all round hard luck story African Barrick Gold (ABG). The chart pattern here is not a million miles away from that of Zanaga described above, in the sense that the price action fits into a falling wedge pattern and from which we would expect a sharp snap to the upside within just a few sessions.  That said, it is worth noting how the shares got into the miserable state they are in now, via an overshoot above the top of a 190p unfilled April gap to the downside. It helps that since that particular charting event that with the stock still  bumping along the bottom of the range that the day candles have now turned miniscule in terms of the daily variation (a bullish sign that selling is becoming exhausted) and that since the beginning of April, the lower price lows have been met with clear bullish RSI divergence and an uptrend line in the oscillator window. As little as a break of the intraday high of Thursday at 156.7p could be enough to trigger the turnaround which seems to be long overdue. The target in the first instance is the wedge top at 174p.

Finally, what has been interesting about Kazakhmys (KAZ) to me (and a favourite of the editors) in the very recent past is the way that March offered such a gift to traders with the unfilled gap to the downside and the 50 / 200 day moving average dead cross, but since the beginning of April the price action has been as easy as going fishing with your bare hands! The magic number though to me is now the April intraday low of 337p – the place to buy on any weakness here in my opinion. The last March low at 382p is a reasonable profit target. Going by these two levels would have served you well over the past few weeks it has to be said, and it may be worth assuming that this will continue to be the case until May’s 392p intraday peak is broken on an end of day close basis – most likely confirmation of a bid for ENRC that finally pushes the stock over 400p.