PGM’s: As Good As Gold?

One of the predictions around the time of the Global Financial Crisis was that given the implosion in the world of fiat money, Gold would soar as a store of value. It did not. A decade on, it has still not done so despite being at multi-year highs. Indeed, the rather ephemeral Bitcoin overtook Gold many months ago, and real estate remains the store of value of choice. But it may be that Gold has an unlikely ally in the Platinum Group Metals, with these both underpinning it (due to historic price relationships) and revealing why in part it has underperformed in recent years.

The key is utility. Apparently, these days price is determined by more than just appearance. The use of Palladium and Rhodium in catalytic converters to tackle the emissions crisis is well documented for petrol cars, while Platinum is the winner with the now somewhat blighted diesel space.

Nevertheless, even though it is bottom of the league currently, as electric vehicles become more prevalent, the laggard metal could revive. The fact that Platinum is also a cheaper substitute for Palladium is likely to kick in as a factor increasingly as the latter is more than double the former.

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The reason why Rhodium is over three times the value of its main PGM peers is that it is a far better emissions reducer. Its higher efficiency allows for the higher price to be sustained, as does the relatively small quantity used per unit. Given the trend channel this market has been in over the past year, there is a likelihood of a peak north of $7,000/oz in coming months.

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Palladium, a more familiar metal to most, has made the headlines with its record-breaking run. It has remained above its 200 day moving averages for over a year, and this bullish situation appears well entrenched. Indeed, while the floor of a rising trend channel from August last year at $1,600, fresh peaks towards $2,000 look to be on the cards.

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Gold, has been frustratingly disappointing for a decade leading up to the rally this year towards $1,500. It would be pleasing to think that it has been dragged higher by the overall boost in the PGM’s, rather than something relatively mundane such as interest rate outlook / the US Dollar. The good news technically, from the daily chart of Gold is that the recent pullback leaves it close to this year’s line of support at $1,450. While this holds fresh highs for the latest rally towards $1,650 could be seen early next year.

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In the case of Platinum, it could be said given its relative underperformance, the fundamentals indicate there could be a revival.  In August there was a revival at the 200 day moving average zone, and the same scenario of a bounce at this technical feature on the daily chart appears probable. A 2019 resistance line projection to $1,050 makes for an attainable 3-4 months target, while the $850 uptrend line is held.

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Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Metro Bank: A Trendline Break And The Right Story

Metro Bank has been a comedy and a tragedy of errors in recent months, the Fawlty Towers of the banking sector. Even now one feels that a revelation of losses or mishaps could be unveiled at any time. The story for the bulls up to now has been that the company could be taken private. But somehow given the state of the company, this concept does not really fit – especially in terms of what would be different for the group as a non listed entity. Far better is talk of Lloyds Banking (LLOY) being a suitor, particularly given the way that the impetus on the larger group to do something constructive has been pressing for quite some time.

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Therefore, it may be no accident that after weeks of the stock of Metro dithering either side of 200p we finally have a major trendline break at 215p. An end of day close above this level today could be the sign that rumour is about to become fact. Even if this is not the case, a run up for the shares towards towards September’s 300p may be on the cards. The only proviso is to keep those guaranteed stop losses in place just in case this is another of the stock market’s periodic “spoofs.”

Is The Pound Now “Predicting” No Brexit?

One of the best and sometimes the worst things about using the charts to trade the markets is that you are effectively shutting down all the fundamentals and the newsflow. A problem also arises when the market gets the fundamentals wrong, as it did with the Pound and at the time of the Brexit vote. Sterling rallied to $1.50 temporarily on the basis that Remain had won – and perhaps because many in the market wanted Remain to win. Since then the rough rule has been more Brexit – sell the Pound, more Remain, buy the Pound.

This pattern has been well followed over the past three years: arguably until now. The impression given in the past couple of weeks is Brexit Deal – buy the Pound, No Deal – sell the Pound. However, the ferocity of the recent rise through the trend changing 200-day moving average is surprising given the way that previously the currency was rocketing on Remain. It is also the case that the “smart money” may be aware that after over 30 years of efforts to keep the UK in Europe, including deposing Mrs Thatcher, it is almost inconceivable that Parliament – which now rules the Government / Executive, is not going to vote in favour of any deal unless it is to Remain. Therefore, conspiracy theorists may suggest that we are not witnessing a Brexit Deal rally, but a Remain one.

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The idea is given further ammunition from the chart and the latest break above the 200 day moving average and a resistance line break at $1.2710 from March. The implication of an end of day close above these two chart features is that we shall be treated to an eventual $1.40 plus target at the top of a December broadening triangle over say, the next 1-2 months. But remember if the chart target is correct, even $1.30 plus would have to be delivered in a Remain scenario. One would imagine it is still the case that if a No Deal Brexit was really delivered as Bluffing Boris has been suggesting, Pound / Dollar would be back at its lows near $1.20 quicker than you can say Jean-Claude Junker.

Shearwater (SWG): Above 200p Could Target 300p

Today’s announcement of a £3bn agreed takeover of cybersecurity firm Sophos has been a shot in the arm for a sub-sector of the stock market which has been relatively under-appreciated given the almost daily news regarding hacking and other cyber nasties.

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It has also underlined the value of what cybersecurity solutions group Shearwater has been building of late. It is also timely given that the Sophos announcement comes in the wake of last week’s news that Shearwater’s subsidiary Brookcourt Solutions has won a £8.5m contract with a FTSE 100 telecommunications group.

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Indeed, it would appear that after a slow reaction in the wake of Thursday’s news, shares of Shearwater are starting to respond. Indeed, they have pushed towards the main resistance line on the daily chart from May at 198p. An end of day / weekly close this week should be enough to snap the 5 month downtrend in the stock and leave the way open for a rally as high as the main 2019 resistance 300p plus. This could happen as soon as the end of the year, especially while there is no break below the late September peak at 180p.

Drax (DRX): Third Time Lucky?

Although it is supposed to be the case that the more liquid stocks are best suited to predictive technical analysis, it can be seen from the daily chart of power station group Drax that this is not necessarily the case. Indeed, in the recent past there have been a couple of recovery attempts which came to nothing.

However, the latest rebound which has taken the shares back to the 50 day moving average at 282p does seem to have some credibility in terms of being a potential trigger to a lasting turnaround.

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This is said on the basis of the sharp bear trap from below the June floor at 260p, and the bullish divergence in the RSI window. All of this goes to suggest that if we are treated to a weekly close today above the 50 day line, we should be treated to a follow on move towards the top of a broadening triangle drawn from June at 340p. While this may sound optimistic, even if the extended bear run continues, an intermediate rally to such levels is possible as it would only be up to the 200 day moving average and take the shares back to where they were in May.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Purplebricks (PURP): Springer As Saviour #PURP

It would appear that at least as far as ailing online estate agent, Purplebricks is concerned, German media group Axel Springer having built up a 26.6% stake to date is akin to the backing Mike Ashley has served up for the High Street.

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The situation has been complicated by the presence of kiss of death fund manager Neil Woodford also being on the shareholder register. What is interesting about the latest surge in the Purplebricks share price is whether it is off the back of Axel Springer topping up its shareholding from 26.6% towards the 29.9% level at which it would be obliged to make a full offer for the company. In some ways it would be better if Woodford has offloaded some of his stock to the German group, given his ongoing need to raise cash.

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At least as far as the daily chart perspective is concerned, the price action today is significant in that there has been a clean break of the 200 day moving average at 133p. Also important is the way that since July the stock has found support at and above its 50 day moving average now at 116p – even on dips. Both these features suggest rare technical strength, something which seems at odds with the company’s fundamentals, but in line with the idea that Axel Springer may pounce on the UK group, or at least be topping up its holding. The charting implication is that while there is no end of day close back below the 200 day line the upside here for the stock over the next 4-6 weeks could be as great as 180p at the top of a rising trend channel from February.

Chart of the Day: William Hill (WMH) #WMH

Although when the mainstream press gets on the back of a company as being a potential M&A situation it is the kiss of death, in the case of William Hill, it may be the case that at least following technical rules we have a stock which is genuinely in play. The reason for the relative enthusiasm stems from this week’s flourish through the 200-day moving average, on the daily chart at 160p.

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It also helps that the shares have made a clean clearance of the former April resistance at 169p. At least while above this on an end of day close basis we have the makings of an interim rally for the shares. The favoured destination currently is for a push towards the top of a rising trend channel from November, with its resistance line projection pointing towards 210p. This makes for a 1-2 months timeframe target at least while 169p is held.

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From a fundamental perspective there are a couple of things to hang your hat on should there be no corporate moves on William Hill. For instance, we are being told of an “aggressive” expansion into the U.S. and at least the pain associated with FOBT’s as reported in this month’s H1 results was no worse than expected. Indeed, it could very well be that it is the Stateside action here that means this perennial dog finally has its M&A day, as is being suggested by some.

Akorn Pharmaceuticals (AKRX): Sharp Bear Trap From Below $2.50 Expected To Continue

It can be said without fear of contradiction, that whereas this really has been the year of the drugs sector, Akorn has not joined the party. This observation is derived at least in terms of its share price, if not its valuation, which at current levels appears to be in the bargain basement area. Indeed, looking at the assets of the firm, the sum of parts really does hint at something well north of where we are now.

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However, going purely by the near term price action, there is plenty for technicians to chew on currently. We have been treated to a sharp bear trap rebound from below the former 2019 intraday low of $2.64 and the $2.50. This is the type of final flush out / exhaustion move that one sees ahead of corporate action – although normally there is a delay before such events happen.

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In the case of Akorn though, one would expect to see a stock price reaction back towards the area of the 50 day and 200 day moving averages near $4, similar to the spike towards the 50 day line at the beginning of August. Only a fresh probe back below $2.50 would really hint that the breakdown in the stock is set to continue and this is not expected for now.