One of the bona fide criticisms of charting is that one can be flying blind without the fundamental picture, just as it can be said that without market timing as provided by technical analysis, p/e’s and free cash flow can go out the window. This point has been highlighted in a rather painful way as far as Carillion is concerned, and even though there have been some signs of stabilization, this is still a situation which does not look appropriate for widows, orphans or perhaps even most investors. From a charting perspective it can be seen that in recent days the stock has been struggling below the 50 day moving average at 45.75p and the neutral RSI 50 level. Both these features need to be conquered on a weekly close basis in order to snuff out the risk of a “final” dip to the bottom of the July trend channel at 35p. The best on offer above the 50 day line looks to be the low 60p’s at the top of the post summer resistance line.
It may be said that in the case of Ferrexpo we were treated to a rather unfriendly, and rather lengthy pullback from September resistance above 320p, a point underlined by the as yet unfilled gap to the downside through 315p. This is a mild warning to the bulls on the negative side. Nevertheless, the way the shares have just delivered a bear trap rebound from below the former initial October support at 257p does provide a bottom fishing opportunity for aggressive traders, especially so given the way we are looking at a rebound off the main uptrend line from April.
The implication at this time is that at least while above the April line at 252p the “minimum” on the upside here should be as high as the 50 day moving average at 289p over the next 1-2 months. A weekly close above the 50 day line points us back to the top of the 2017 price channel at 350p plus early in 2018.
Although there was an initial false dawn in terms of the July gap through the 50 day moving average shown in blue and now at 81p, the second gap through the line this month was covered here, and has “worked” very well. This is said on the basis that there was no significant pullback or even token attempt to fill the gap higher. This is only seen in the strongest of situations. But there is more. Also not seen except for in the strongest of situations is a first time clearance of the 200 day moving average – now at 93p (in black). This combined with the overall flattened W shaped reversal here on the daily chart over many months suggests that the 160p plus 2017 price channel top target could be hit as soon as the next 3-4 months. Ideally, there is no sustained pullback below the 200 day line in the interim.
Vast “did the business” at the start of the year, by nearly 10 bagging ahead of a golden cross between the 50 day and 200 day moving averages. While we may not quite match this level of excitement by the turn of this year, there is a decent chance ahead and in the aftermath of the current golden cross we could see the stock double. This is especially while the shares remain above the 200 day line at 0.42p, and the RSI now at 60/100 is consistent above neutral 50. The February resistance line projection is already promising a 2-3 months target above 1.10p.