Yes Carlton, charts do plot the day to day direction but as we have seen with MNB quite a few times now, the trend direction can turn rapidly and it's often not an established or obvious trend until the move exceeds 50% down or 100% up. By then it might, or might not be, too late to act as the next reversal might be due. The recent new uptrend was really only strongly confirmed after the price exceeded 8c but that turned out to be the worst time to buy - with hindsight. Prior to that, the break of 5c support and then the break of 4c was the worst time to sell.
The chart recently has been too volatile to use on its own as a good guide to buy or sell.
Take this following chart as another example. This is actually a medical company with a very good drug that's been in the market for many years. The price decline says nothing about the drug but rather a failure to gain an expected US FDA approval. The result was a far larger 5 year decline than MNB has seen. There have been some big rallies of 100% or more during the down trend but without US FDA approval, those rallies failed. The stock is again up 100% over the last 1-2 weeks with most of that move in the last 2 days, including a 20% gain yesterday which was a shocker of a day for the All Ords and with no recent news.
The reason I mention this is - at what point do you decide it's time to buy based on a chart and believe that this is not another rally that will fail? I'm thinking it would need to rally another 100%, i.e. more than quadruple from its 40c low to break past 1.75 before you could start to think that the worst has passed. The problem with that is, you might be wrong and might be buying an extreme peak before a very large drop. Or you could be right, the drug receives FDA approval and the sp goes to a new high. Waiting for the FDA approval might see the sp at $3. Upside from there will be much more limited and you missed out on a 7 fold gain or better waiting for that certainty.
Back to MNB's chart again, the company had made good progress last quarter, went from near zero cash to well cashed up with the SWF investment and that allowed anyone that bought near 4c to enjoy a 100% rally. Unfortunately a 7c cr resulted in short term profit taking which I believe then triggered option underwriters to also take profit bringing the sp down to the 5c option price. A big drop in our market yesterday saw that approx 5c support break.
The question now becomes is this time to sell or buy again?
Do holders sell now and wait for offtakes or some alternative, the certainty of both debt facilities being finalised, construction to finish on time and commissioning to confirm no issues? The sp could be 20c by then. Or do you wait for the sp to go past the previous 9c peak to decide the market is telling you everything is ok? The problem with waiting for the market to "speak" as some hear put it, is that you might be buying a peak or selling a low.
What has changed since the last time the sp was at this level?
Cash increased from near zero to over $12mill, through both the cr and options exercise in Australia and through the first installment from the Sovereign Wealth Fund.
The IDC facility agreement was signed, although it is still waiting on an offtake or an alternative that would be satisfactory to the IDC.
The SWF invested in the project at a price equivalent to 8c per share. Something some investors (and non holders) doubted would happen. One very vocal non holder said there was no way it would happen at that price. That news was very well received when it came.
The Bank BAI term sheet was signed.
Civil construction work has finally commenced.
And yes Merchant, the US Dow Jones futures were down over 600 points last night but the physical market finished down only 0.28%.
Will today see a big rebound from an across the board panic sell-off yesterday?
