A customer comment prompted this week’s article about the markets. He said simply: “In 2008 it was the bankers to blame for the market crash, in 2015 it looks like it all happening again but this time it’s the miners.”
For a giggle, I opted bring together the charts of Anglo American (LON:AAL) with Glencore (LON:GLEN), KAZ Minerals (LON:KAZ), and even the disaster which is Lonmin (LON:LMI) and can only conclude, perhaps he had a point.
A few of the culprits have now achieved their logical bottoms, while note one has yet bounced into the realms of sanity. Then again neither has a single bank share. It feels very much like two of the four are treading water while awaiting the other two to complete their dying swan thing.
To get the bad news out of the way first, AAL is viewed as heading to a hopeful bottom of 350p currently. The share price needs better 520p to scupper this immediate argument. While it is currently trading around 440p, I wouldn’t regard it as cheap.
In fact if the market opts to drive the price to its ultimate bottom, somewhere around 280p would be a brilliant point to take a smash and grab, if for no other reason than I cannot calculate a number below such a point.
Of course, on the chart it’s KAZ’s behaviour which is literally head and shoulders above everyone else.
KAZ, shown in light blue, unfortunately outperformed the market, paying for its crime by being hammered. Amusingly, the arithmetic associated with a head and shoulders formation suggested KAZ should have bottomed at 220p or so.
Thankfully my own ultimate bottom proved to be pretty well on the money as the share hit, then literally doubled in value over the next few sessions.
It is most emphatically not out of the woods yet as it now needs trade above 120p before I will risk speculate it intends recover to a longer term 229p. In fact, it actually is now a wee bit dangerous, due to it not bettering its ruling downtrend. Ultimate bottom is now 16p!
Glencore is shown in red on the chart. While it avoided outperforming as its listing commenced at exactly the wrong time, the share really needs better 118p to stop me muttering darkly about an ultimate bottom of just 37p.
Similar to KAZ, when it hit its low of 66p, it bounced and doubled in value but did not better the long term downtrend.
Movements since have been fairly lacklustre and if we were to see it around 71.5p, I’d tend propose that as a viable entry point which a pretty tight stop, due to the risk of 37p making a guest appearance.
Finally, the ugliest kid on the block is Lonmin. This share is a nightmare. I’d calculated an ‘ultimate’ bottom of 14p and the price decided I was talking nonsense.
In fairness, it was forced below with a gap at the open on November 10. Thankfully this means two things. Firstly, I’d been calculating against the correct trend and manipulating downwards at the open was the only option left to the market as it would have bounced otherwise.
Secondly, it has started a new trend with the result I’m now rather worried. Until this share now actually closes above 14p, every single calculation against its future potentials returns -16p. That is, a value of MINUS SIXTEEN PENCE.
Sometimes this happens when a share gets below ‘ultimate’, sometimes the shares keep trading and becomes a market plaything.
I honestly prefer not to comment against shares in this state as they will often (as LMI has) enter an area of the market where it will suddenly show flamboyant movements, only to find it was just games with the offered spread.
If I judge it against movements since November 10, perhaps the next bottom will be 7.5p – but I’m just guessing here. If it somehow were to close above 14p, I shall take it seriously again.
In summary, I suspect Glencore and KAZ will muck around below their immediate downtrends until Anglo American achieves its 350p thing. Around such a point, I’d hope they all come back into sync as:
AAL needs better 520p to stop going down
KAZ needs better 120p to stop going down
GLEN needs better 118p to stop going down
LMI needs a visit from the Xmas fairy.
Alistair is founder of www.trendsandtargets.com