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Impala shares set for breakout
Colin Abrams
Posted: Thu, 03 Jul 2008
[miningmx.com] -- PLATINUM stocks have been consistent outperformers among resources stocks in the current bull market.
However, platinum stocks have been fairly "quiet" in recent months.
We take a look at the charts of Impala Platinum (Implats) as well as the platinum price in rand.
Implats is now reaching a critical support level and the probabilities favour a rally of support.
You should therefore look to buy it. Moreover, an upcoming breakout in the rand platinum price will be the impetus to push South African platinum stocks sharply higher.
Implats - testing support level
Click on image to enlarge
Trend: Short/medium term down, but oversold. Long term up.
Strategy: Buy as close to line 1 as possible.
* Implats has fallen to long-term support (line 1, at R287). The 39-week (or 200-day) moving average coincides with line 1, providing double support there.
Over the short term the price is in a falling channel (lines 2 and 3) and a breakout above line 3 is expected soon.
* The weekly stochastic oscillator (on top) is moving into the oversold zone, which is bullish for the medium term.
* Buy as close to line 1 as possible (R287). Longer-term players (investors) to hold/buy nearer line 1.
* Once the upside breakout (above line 3) occurs, look for a rally at R335.
Take profits incrementally for traders - eg, a third at R335, more at R350 and the final third at R362, if reached.
* The initial stop-loss if buying near line 1 will be a daily close below R285. If buying on a close above line 3 the stop is a close below R294.
Platinum (rand) - bullish chart
Click on image to enlarge
Trend: Medium term sideways. Long term up.
Strategy: Buy platinum stocks aggressively on a close above line 2.
* The rand platinum price is currently moving sideways in a broadening formation (lines 1 and 2). That's a "pause" before more upside. The price needs to close above line 2 (R16 800) to confirm the new bullish breakout.
* The weekly stochastic oscillator is neutral but turning up, which is bullish.
* Once the price closes above line 2 (R16 800) buy SA platinum stocks aggressively, focusing on the two main stocks in the sector (Anglo Platinum and Implats).
* The breakout above line 2 will set up a "minimum" upside target of R19 300 - ie, measured as the height of the triangle projected up. That will be approximately 20% above the current level of the rand platinum price.
* The initial stop-loss on this chart will be a daily close below R15 250. Look at that level in conjunction with support on the individual platinum stock(s) you're buying.
Please note: For more recommendations and charts by the author on shares, indices and commodities please go to www.themarket.co.za.
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