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Alas, it is normally the case that once financial journalists get on the back of a story, the story is about to end. This very often means inadvertently calling the top – or the bottom of a market run, depending on where it is in its journey. However, while there have been some painful false dawns for the likes of Gold and Silver over the past 10 years. The flaws here have been that the bull argument has very often depended on the elusive “store of value” concept. However, what the “experts” did not count on was no soaring inflation despite QE and a general asset bubble inspired by near zero interest rates. Instead, it would appear that the rally we have seen kicking in properly in H2 2019 has been inspired by the rather more pedestrian sounding concept of supply and demand. This point has been underlined by the way that the geopolitical drivers we have been treated to in recent days have only offered a temporary acceleration to Gold.

What can be seen on the daily chart of the yellow metal has been a brief spike through $1,600 before slipping back to the more sustainable mid $1,500s – maintaining the recovery trend – but not quite as frothy as some might wish to see.

Clearly, the PGM’s, especially in the form of Platinum, Palladium and Rhodium, the supply and demand concept has worked far more notably than store of value, as these metals are now core players in the “Greenification” of the motor industry, especially with reference to catalytic converters. But, perhaps much to the joy of bulls of PGMs we have seen this particular asset class maintain the benefits of being geopolitically sensitive, as well as having a practical purpose helping them maintain their rally.

The stars of the show remain Palladium and Rhodium, with the daily chart of the former still offering a possible $2,400 3 months technical target. At the same time, the short term target of Rhodium allows us to seek out $10,000 on a three months timeframe, given the sharp momentum behind this market.

All of this suggests that even the relatively pedestrian progress of Platinum – a market which appears to be mirroring the conservative price action of Gold, could still retest or even exceed the previous 2019 peak of $1,000 before Q1 2020 is over.

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.

Richard Jennings, director at Align Research,  discusses the state of the small caps market in 2019, and the outlook for 2020 including Align’s top Five conviction stock picks.

A fear of heights is perhaps the main block to investors going for the momentum trade – even though this has been the way to go in most instances of the past decade, and a spectacular bull run. The answer to the conundrum currently, and in most situations is to take things on a case by case basis. The three charting situations that follow illustrate some of the merits and otherwise of technical analysis in a mature bull market.

Acasti Pharma (ACST):  Key $2 Support Zone

Phase 3 Trial speculation has been like a red rag to a bull for hedge funds and other fast money in the market, something which has marked out this stock in a positive way, even before one investigates the daily chart. From a technical analysis perspective this stock has been a chartist’s dream, with the first big break being of a red October line of resistance near $1 in mid June. The subsequent rally caused a near tripling of the share price within 6 weeks. The next big break was just last week at $2.20, with the push through a red July resistance line. The stock rallied well in recent days before the latest sharp correction, with the prospect now that while there is no end of day close break back below $2.20 we could still see considerable upside. The top of an October 2018 price channel at $3.50 could be hit over the next 1-2 months. Below the 50 day moving average at $2.03 would however delay the prospect of fresh highs.

 

Amarin Corp (AMRN): Support Above 200 Day Line

Speaking of stocks trading at decade highs, we have Amarin at just such a position. While there has already been something of a knock back from the aftermath of a long awaited FDA approval, the stock continues to consolidate well above its 200 day moving average at $18.25. While there may continue to be something of a churn in the 200 day line zone up to $25, the longer the gap higher through $20 is held, the greater the prospect of an eventual breakout towards the top of a May rising trend channel at $35 could be seen over the next 2-3 months as a best case scenario. Of course, simply waiting on a clearance of $25 to then anticipate $35 would be the momentum strategy of choice for those concerned we have already seen a bull trap.

 

Colgate (CL):  Price Channel Support Towards $67

Dividend growth and margin fears have hurt Colgate shares since the summer,  something which gives the impression that the relative new CEO has inherited a poison chalice. Therefore it may take more than getting on the TikTok digital marketing bandwagon to revamp market perception. However, judging by the daily chart of Colgate there has been a slow change to the positive, coming in the form of a break of a red line of resistance from September at $68. It also helps that the blue 50 day moving average at $67.63 – the floor of a rising trend channel from December. Therefore, the chances are that at least while there is no weekly close back below the December uptrend line the upside here should be at least towards the 200 day moving average at $70.31. What would really help the cause of the bulls would be a clearance of the 200 day line, an event which could then open up Colgate to fresh strength towards the top of last year’s trend channel at $78 by the end of Q1 2020.

 

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.

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.

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.

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.

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.

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 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.

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.”

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.

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.

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.

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.

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.

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.

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.

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.

 

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.

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.