5 Technically Weak Mining Shares - Results

courtesy of Daquella Manera on flickr
http://www.theel1tetrader.com/2013/04/5-technically-weak-mining-shares.html

12 trading days have passed since I first covered five London listed mining shares that I deemed to have a technically weak trading position. As I noted before, no fundamental analysis was undertaken on these five stocks (hence why they have not been inserted into the 'Review Results' page), but charts were provided for the companies. This article is testament to how technical analysis should always be considered when reviewing a share regardless of the company's fundamentals. Technical analysis will not always be entirely accurate, but it is useful nonetheless. The charts that were highlighted in the original article are still shown, but with updated commentary beneath and the percentage changes displayed.

1 - Baobab Resources (LSE:BAO). Review price = 19.39p. Current price = 15.88p. Change: -18%


As expected, Baobab continued to drift downwards following the dissipation of hype that previously surrounded the stock. This was created on low volumes but loosely mirrors the movement of that in 2011. With the current price a full 18% off the original review price, there is scope for a short-term bounce, but I would fully expect the decline to continue towards the 13-14p level as predicted.

2 - Berkeley Minerals (LSE:BMR). Review price = 2.35p. Current price = 2.25p. Change: -4.3%

Berkeley Minerals has been the most stubborn of the five shares with the share price currently only 4.3% off the original price, which is not bad at all considering the strong downward trends that have been set for many mining stocks.Regardless of this, the bearish continuation pattern is continuing with the share price failing to lift off the lows. The likely outcome is a breach of the 2.20p level as outlined in the original review before a test of 2p.

3 - Coal Of Africa (LSE:CZA). Review price = 13.25p. Current price = 12.5p. Change: -5.7%

Coal of Africa was the second most disappointing mover from a negative perspective. The downtrend has continued, with the long-term resistance still not having been breached, but there is currently a real lack of selling pressure. On the other hand, there is also a complete lack of buying pressure which means that CZA is still likely to re-test the 10.75p lows over the next few weeks. Still a bearish outlook here.

4 - Medusa Mining (LSE:MML). Review price = 274.5p. Current price = 207.13p. Change: -24.5%

Initially, Medusa made a positive start following the write-up with the share re-breaching 300p. However, this failed as support and a significant downward spike was formed that effectively verified the sell signal. With precious metal prices slumping in recent sessions, Medusa felt the full brunt of this force with the share price down by a quarter over just twelve days. My medium-term target of 210p was quickly reached with the current price just below this. Probably wise to take the cards off the table here as a precaution.

5 - Arian Silver (LSE:AGQ). Review price = 10.25p. Current price = 6.88p. Change: -32.9%

Despite the significant losses, Medusa failed to really test Arian Silver's performance. The shares crashed through the 10p resistance, enforcing the long-term downtrend pattern with the 8.5p target reached very quickly. The shares currently stand at 6.88p representing a ~33% decline. Fundamental issues such as potential future funding issues have arisen recently, but from the chart it would appear that the market was aware of this. Similarly to Medusa, best to take any sell cards off the table here and bank any gains.

With the average decline for the five shares standing at ~17%, I hope this proves to an extent that you should always examine the chart position of the companies you invest in. The Baobab scenario proves that buying in on shares that are high in their cycle carry significant risks, with shares such as Arian Silver proving that what may appear to be cheap on a historical basis, may not actually be the lowest price that will be achieved. Best of luck with your investments!

3 comments:

  1. V.Good calls on three of them

    CraigJ

    ReplyDelete
  2. Didnt believe that Baobab would keep on falling. Fair enough though. Dog of a share

    ReplyDelete
  3. very insightful and useful. Thanks a lot

    ReplyDelete