Zam Mir on Centamin – The Turnaround

Although it might have been irresponsible to call the floor in Centamin (CEY) ahead of the 48-hour deadline for the former president of Egypt to “vacate office” shall we say, the fact that shares of the gold miner and Egypt proxy did not decline any further below 30p, despite all the chaos in its adopted country, was a very bullish signal to me. Such “divergences” between price action and fundamentals are very often bankable.

However, it can be seen from the daily chart that we have been here before in terms of potential recovery situations. For instance, in March of this year it did appear that the stock would break above the 200 day moving average – then near 70p. There was another false dawn as recently as last month when the shares attempted to break back above the blue 50 day moving average – then at 39p.

The position now can be best described as an attempt to break above the resistance line of a red falling (bullish) wedge formation, one that has nominally been in place since the start of this year. The resistance line runs through 35p, a key area given that since December this has been the support zone for the stock in recent months, and was only recently broken at the end of June.

The question now of course is whether we have seen the worst here? As I implied above, if you mix in the fundamental and technical divergence we had at the start of the week, then it can be said that we finally have a buying opportunity here at Centamin. However, if you are looking for a momentum trigger that is likely to last, then you have a choice of waiting either for a weekly close above 35p, or above the 50 day moving average currently at 37.8p, or even back above last month resistance at 40p. Nevertheless, with today’s unfilled gap to the upside through the 10 day moving average at 31.8p (unfilled gaps are very often the starting gun for sharp moves to the upside), it is very difficult not to get caught up in new bullish enthusiasm for this stock.  This is particularly the case given that remaining above 35p on a sustained basis suggests a swift return to former 50p March support.

There are also a couple of stocks I would like to look at in the wake of recent sharp share price rises. In fact, both are something of a lap of honour in the sense that both have behaved according to bullish charting predictions and provide decent lessons in terms of what to look for in order to find the best technical trading opportunities – take a look at my book below to learn more about various TA myths and that I cover in this guide.

In the case of Coms (COMS) it can be seen that the starting gun for the massive move to the upside over the past three months was an unfilled gap through 1p and above the 200 day moving average at 1.15p currently. Unfilled gaps generally create a continuation in the move of the gap over ensuing days and Coms remains backed by this chart feature.

What can be said after the vertical April move was delivered was that there was a period of consolidation within a converging triangle( shown in red) with the end of day close above the triangle at 3.17p. The implication of this breakthrough was that there would be a second leg higher equivalent to the 2p we saw at the end of April from 1p to 3p, therefore logically taking us to a 5p target. Most large moves in stocks and markets consist of two major discernible components.

So far we have been treated to a penny and a half of the theoretical upside of 2p, and indeed the top of the April price channel is heading as high as 5.5p, a target that at the present rate could be hit as soon as the end of this month. The best end of day close trailing stop loss at this stage would be back below the 10 day moving average currently at 4.16p, something that makes for a reasonable risk reward /ratio even though the RSI currently at 70 is somewhat overbought.

Finally today, I have Ultrasis  (ULT) and where I spotted them at the beginning of last month on the first break of the 200 day moving average in over a year, and the subsequent three-day bull flag break above this key line. Rather as in the case of Coms, the likelihood is of a two stage move to the upside, with the second leg up coming on an end of day close above June resistance at 0.79p while this may take some time – perhaps a few weeks, if the buy trigger is delivered we could see the top of a two-year broadening triangle on the daily chart hit 1.2p over the next couple months. The fact that the start of July has witnessed a golden cross buy signal between the 50 day and 200 day moving averages only helps to instil further confidence in the bull scenario.