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Northam breakout signals a "buy"
Colin Abrams
Posted: Wed, 14 May 2008
[miningmx.com] -- TAKING A LOOK at the platinum sector, we start with a chart of Northam, which has been in consolidation mode for the past two months.
That’s primarily due to a weaker rand platinum price (and US-dollar platinum price).
We show the chart of the rand platinum price and what’s expected to occur there.
The charts show Northam breaking out above resistance at the time of writing to give a buy signal. In all likelihood that’s pre-empting a breakout in the rand platinum price to follow.
NORTHAM - BREAKING OUT
Click on image to enlarge
Trend: Short/medium term sideways. Long term up.
Strategy: Buy for a renewal of its uptrend.
• Northam has traded in a falling wedge (lines 1 and 2) over the past two months. Falling wedges typically break out on the upside. Last week it broke out above line 2 resistance. It needs to remain above line 2 (R68,80) for another day to make the breakout more convincing.
• The MACD (on top) has pulled back and looks set to cross its dotted moving average to give a new buy signal, thereby confirming the bullish breakout.
• Traders buy Northam for a new rally, particularly if it does close above line 2 for two consecutive days.
• The minimum upside target will be R82,50 – ie, measured as the height of the wedge projected up. Start locking in profits as the price nears R80 and take more profits as the target is reached.
• Place your initial stop-loss as a closing price below R65.
PLATINUM PRICE (RAND) - CONSOLIDATION
Click on image to enlarge
Trend: Short/medium term down, but oversold. Long term up.
Strategy: Buy platinum stocks on a close above line 2.
• The rand platinum price is giving a rare pullback in what’s been a phenomenal uptrend in recent years. Such a correction is an opportunity to buy platinum stocks.
• The price is in a falling channel (lines 1 and 2). Line 2 resistance was at R15 280 on Monday, 12 May and declining at a rate of R60/day thereafter – eg, to R15 220, etc.
• A closing price above line 2 will confirm the next run in SA platinum stocks, although a share such as Northam is already breaking out. (Commodity stocks tend to lead the commodity price.)
• Once the breakout occurs, look for a rally to retest its prior all-time high of R17 955. Once the price nears that, start looking to take profits on platinum stocks (to be looked at in conjunction with the individual platinum stock charts).
• Meanwhile, if the rand platinum price does continue down over the short term, support is at line 1 (R13 550).
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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