Zak Mir technical commentary – Bumi, Talvivaara, Centamin Egypt & RPS in focus
While the London stock market itself was moving sideways throughout most of last week, as far as the leading movers amongst the FTSE 350 were concerned, you were spoilt for choice as to action situations to get involved with. What was interesting in terms of both the collapse of BG Group (BG.) shares and of Centamin Egypt (CEY) is that they were both essentially “bolt from the blue” affairs – the type of shakeout where you have no pre-warning. While you may have been able to identify that the shares were due to fall in the near-term (arguable), the sheer magnitude of the price moves was certainly enough to catch many off guard.
As far as Centamin is concerned, you can see on the daily chart that I have drawn a red line of support from May. This currently runs through the 70p level and can be regarded as essentially the dividing line between a terminal decline setting him, and a much less likely recovery. The reason that a rebound is unlikely is because of the initial failure just below the 200 day moving average at 78p on Thursday. The fact that the stock just could not make it up to the 200 day line, albeit missing it by just a fraction of a penny, is a potentially disastrous technical indication. The view going forward is that even though the stock is extremely oversold in the oscillator window with an RSI well below 30, it is likely that 70p will cap the price action here. Only an end of day close back above this level will prevent a partial or even full retest of the 35p intraday low seen in the middle of the week.
Moving onto Bumi (BUMI) shares certainly backs up the idea that there is no intention on my part of avoiding the difficult calls! The stock has been covered very extensively in the on-line magazine of this publication and in the Blog (check the Bumi tags to the right).
What is interesting from a charting respective is that the September/October island bottom buy formation is one that itself provides the head of an inverted head & shoulders formation in place on the daily chart since the beginning of September. The fact that we have gap up from the right shoulder suggest tremendous power behind the latest move to the upside. On this basis one could probably get away with an end of day close stop loss as high as the mid-October £2.63 resistance as we target August’s £3.50 plus peaks. Those who feel somewhat intimidated by the setup as described here could of course wait for an end of day clear close back above September / October resistance intraday at 300p before targeting close to 400p over the course of November – a level that this magazine has as a price target.
Those who do not feel like going for such a high octane play, then one could choose to go for RPS Group (RPS) in the wake of Friday’s rebound off both the floor of a rising June trend channel and the 200 day moving average at £2.28. This idea is backed up by bullish divergence in the RSI window between the last two October lows below £2.35. The implication is that while there is no end of day close back below the 200 day line at £2.28, we should be looking at a retest of the post-September resistance through £2.55 on a 4 to 6 week timeframe.
Finally, I couldn’t resist adding Talvivaara (TALV) even though there were only going to be three stocks in today’s blog. The reason for the inclusion is the way that there has been a double bear trap going into the beginning of November, with support coming in finally just below £1.30. The implication is that while there is no end of day close back below the November 1 intraday low of £1.28, we should be looking for a quite a sharp rebound back towards the top of the October gap at £1.46 as an initial target. Of course, an end of day close above the gap would really get fireworks going for the bulls. This is especially the case as the whole Talvivaara bottom fish idea is backed by bullish divergence in the RSI window between the last three lows.
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