Zak Mir on SBM’s “Dear” founder & The Mining stocks challenge!

Every now and then I like to take a look at what can only be described as the “favourite” stock of Spreadbet Magazine founder Richard Jennings – Kazakhmys (KAZ). As luck would have it, the last big move for the shares to the upside was spotted as a Cup & Handle buy formation and indeed, the upside in the form of a near 40% move was delivered in just 24 hours at the end of February.

While it may be pushing it to assume that we shall see as much on the upside over the next few weeks, the setup here currently is noteworthy for a couple of reasons technically. This is derived from the latest gap floor rebound from the second February gap to the upside based at 235p, something which provides for the stop loss on the bull argument.

When you add in the way that there has been a rising trend channel for Kazakhmys based around the higher February gap floor we have notional double support in the mid 230p’s. What helps as we go into the end of this week is the way that the stock is delivering a break of the 200 day moving average now at 248p. A weekly close above this feature suggests that a new leg to the upside and a possible October resistance line projection target as high as 330p could be on tap over the next 4-6 weeks.

Russia focused steel / mining group Evraz (EVR) is also in focus at the moment on a technical basis given the way that it, like Kazakhmys, is breaking its 200 day moving average – hence suggesting a positive trend change. The feature in question actually runs through 102p, something which implies that at least while there is no end of day close back below the 200 day line we should err on the side of the bull / recovery argument.

It also helps that in breaking back above the 200 day moving average Evraz has also pushed back above former December 96p intraday support. On this basis, just looking at the recent price action, it can be seen how there is every reason to assume a retest of the former December resistance at 118p given the way that this is the only big resistance to conquer between present levels and what was achieved at the end of last year. What can also be said is that given how sharp the V shaped recovery from March sub 60p one would be looking for a weekly close above the old December peak to deliver upside as great as the June price channel top 155p over the 1-2 months following any weekly close above the December peak.

I finish today’s blog with one of the smaller and highly speculative mining stocks – even by the volatile standards of this asset class. As far as Avocet Mining (AVM) is concerned it may be tempting at first glance to go with the idea that the shares are struggling after a very painful looking February / March bull trap through the 200 day moving average now rising once again at 12.37p. 

This may be significant, as might be the way it is possible to draw an uptrend line in the price window from July last year at 8.25p which has been multi-tested. There is also the backing of a rising trend line in the RSI window from December running at 40. On this basis one can say that at least while there is no end of day close back below the July uptrend line at 8.25p – not too much to risk, the upside here over the next 4-6 weeks for Avocet Mining could be as great as the March resistance zone towards 14p. Cautious bulls may however wish to wait on an end of day close back above the 50 day moving average as a momentum buy trigger before taking the plunge on the long side.