my very very rambling thoughts on the chart -
if you look at the charts for s32 sto igo bhp rio and wsa longer term you can see some similarities. i prefer to look at them as head and shoulders with the shoulders down stopping on the first or second fib for the good ones and then new highs reached on the recovery leg. if you add a consumer stock like mcq to the mix it is easy to see the defining factor has been the covid impact in early 2020 for all of them.
They were all coasting nicely until jan 20 when covid hit. since the early 2020 lows they have all more or less doubled 100% and hit the same cluster of support/resistance before diverging on their different paths
igo doubled before pulling back on fib levels and undecided here but a shallow pullback is promising of more gains.
bhp has hit a new high after years of churn and back churning here but again a minor pullback
sto has decided to tackle the next level and has a chance of doubling again but it is now sitting at the next level of resistance on its journey. sto is my largest holding of them as i like management and its potential to reclaim its higher levels over time
wsa has failed and pulled right back after hitting that 100% level
s32 is undecided but it is clearly a very minor pullback, if any, just here with a nice channel up
i look at it all and see it as a pivot point coming up on all these stocks
if Dave is correct and we are about to see a retreat in commods then i would see s32 pulling back along with everything else again.
but if we see further rises in commodities then s32 should repeat the sto chart.
i like these stocks as they have the funds and the backing to take out the smaller explorers. we should see a growth pattern similar to the US where the big plays get bigger and we should end up with a fair few replicating rio at $100 plus
the only question for me is will I be on board from the lows or not. it is very easy to hit sell and never buy back.
as their announcements come out i can reassess and weed out the ones no longer at that journey
of the bigger plays bhp has rerated without even trying hard. the board has been in care and maintenance and also failed in projects. if the plays get their act together they will follow rio
it is blind time just here. the safest path is to sell and wait and see
some expect that we will see a spike in gold before everything pulls back
personally i would prefer to see everything pull back here. it then becomes easy. the vix will spike and gold will follow and the cycle repeats
it is blind time but there is a pattern which i am watching for
the strategy was to let the goldies spike last year and move into recovery stocks like sto and also some consumer type stocks like eml and let them double - tick
now is where the discipline kicks in and the need to sell and reassess for normal tax selling in may before reassess again
others will look at s32 and pull the chart apart. my approach is more big picture and the law of averages on best of breed stocks with the right macros
s32 has had years to get its act together and it may rerate internally on the right announcements. longer term it has the funds and support to do well with the risk of some pain likely over the next few months
if you want the chart pulled apart have a look at that channel on s32 from may 16 to july 16 where it churned for a few months before it resumed its channel up to new highs in oct 18. it would be nice if that pattern repeats over the next year or two.
you can also see from dec 16 to july 17 it then sat at the exact same level it now sits at before it tackled the new highs and then pulled right back in july 19 again to the exact same level it now sits at. covid took it on a spike down in early 20 and it has now recovered to the same level just shy of $3. if the pattern repeats it could sit here for a long time. it needs commods to rerate or some of its projects to bear fruit.
if commods resume their rise then s32 should continue. i see $3.66 as the next realistic target for a number of reasons.
I also see it as dependent on commods and it has already done its job on this leg.
but s32 has been very active with projects for a few years now. unlike bhp which has done very little in these uncertain times. unlike the specs, s32 is big enough to take a risk on new projects and longer term it should score some home runs so i like it as a long termer especially if commods rerate over the next year or two albeit with some pain here and there and some risk.
one lesson from it is to buy as the Rothschilds did and buy during recoveries from collapses. the risk is they fall further but the rewards are 100% gains which we have seen over the last year.
s32 is in a nice up channel. have a look at the s32 chart in oct 18 at its previous high. it failed there badly. can you see how in feb 19 it tried to recover that high and failed. if you do get caught in a waterfall down there is often a chance to sell into a failed recovery at close to the high before it resumes its fall. the question then is are we at that point now?
if we look at bhp and rio we can see we may be. the falls are not critical . there should be a bounce but unless it takes out the recent highs it is likely to see churn and fade lower. it is very similar to what i saw on the gold chart last year. it is one thing to pick a low but quite another to pick a high and have the discipline to sell into it. so this next quarter of time will be interesting
my experience is a possible spike up in july after a pullback but we will see. it is an unusual year with covid still in play and very sad for the families and people affected by it. we should see a recovery as the vaccines kick in but who knows.
mcq new high today after the covid waterfall down. 100% gain locked in for holders who have sold and now will see if they rebuy this spike up further. it is an encouraging sign. if europe recovers it could be a big year. i am not as confident as i was in january and glad i divested into some consumer stocks and some sound material stocks like s32. materials have been brilliant with spike after spike in the minnows. it would be good to see s32 finally have its turn.
but my experience is year after year we see selling hit some time in may june before a big july onwards. there have been exceptions. post gfc we saw bhp run in the following may. very unusual. that is my one hope for this year. it is post covid. i hope but do not expect we will see the green run continue but the averages are against it. it does not matter if it picks up in july anyway. a quick blip down wont matter. bhp ran and ran from dec 08 to jan 2010 straight up. it then fell badly from may to june 2010 before resuming its final spike up before churning for many years.
very similar to this pattern on the market so will see if it continues or not this may. but smart money will sit it out methinks. they may miss some profits but they also miss a lot of risk just here. the correct call was when $2 held for copper. that was a buying opportunity and it worked. here and now it is harder and 50:50. i hope you picked s32 up early on this run. well overdue for its turn for a rerate.
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