Zak Mir on XEL, AVM & the big call

3 mins. to read

There are always a few personal achievements outside family life that you know you will always cherish. Getting your first book published, writing your first trading guide for Spreadbet Magazine and, given my day job, making a correct big call on the market.

Indeed, I already know what my best call even will be. It was made at Master Investor in April 2009 when I told the gathered audience that the FTSE 100 would bounce off its 20 year support line then at 4,000 and go on to make a triple top with the 2 major highs from 1999 and 2007 from 2013. How did arrive at such insight? Well, it was the case that if 4,000 held – quite likely, the most obvious formation for the index to deliver was a triple top and within 8 years at the most (8 years was the time between the 1999 and 2007 peaks). Judging by the angle of ascent for the timeframe on the peak of the triple top, this was seen as sometime between 2013 to 2015 – a little sooner than the distance between the first two peaks. On this basis the May peak for the FTSE 100 above 6,800 was right on cue.

There is a little more though… It is that even if the triple top call is incorrect and we soar to 10,000 over the next year there, was still going to be a pullback from the zone near 7,000. The favoured retracement level is a third of the 4,000 – 7,000 distance, towards 6,000 and close to the present level of the 200 day moving average at 6,123.

Away from the big picture and onto the chart of retail investor favourite Xcite Energy (XEL), a situation which appears to be a real head scratcher from a technical perspective even though, on the fundamental perspective, the prognosis has been modestly improved by the $15m technical data sale announced recently. What is clear from the chart is that we are in the aftermath of a bear trap from below 90p last month, and that the recovery of the 104p level where the rising 200 day moving average lies is a significant plus point. However, one would really like to see the former January resistance at 110p cleared in order to provide the kind of compelling buy signal required in what, to my mind, remains a highly speculative situation. Therefore if you are not already long, it may be worth waiting for a decent weekly close above the 110p level before joining the getting caught up in the mania crowd which the shares usually experience on the periodic spikes.

Ouch! is definitely the word to apply when it comes to Avocet Mining’s (AVM) recent history. Indeed, even the might of our friends at the Vampire Squid aka Goldman Sachs and their recent Buy recommendation in the mid 20p’s was not enough to stem the losses which have been relentless in recent months.

There are a couple of useful technical points to note here now however. The first are the unfilled gaps to the downside from January and February, with the general charting rule being that unfilled gaps usually appear in twos and threes – rather like profits warnings. SBM have been buyers of this stock and it’s fair to say that as with their other nemesis recently – Kazakhmys, that fundamentals and value in the stock prices have been big blindsiders here. The chart looks to be probing the very bottom of the trend channel since mid Feb and with the gold price recovering in recent days and the RSI back around 23 then a bounce is looong overdue… Bulls will hope for a filling of the gap down from 50p which, to my mind, would come through a bid approach. Watch for a break of 15/16p on strong volume as a smoke signal that they have been approached and the stock is to move higher.

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