Platinum producer Lonmin, one of the most “hated” stocks in 2012, has formed a base for most of 2013 and is now rallying back impressively. Its chart shows two upside targets.
Lonmin: Two higher targets
Recommendation: Buy on a minor pulback.
Trend: Short and medium term up. Long term sideways to down.
n Lonmin is staging a comeback, having broken out of a symmetrical triangle (lines 1 and 2) last month. It accelerated up last week after giving a price gap (labelled). It now has higher targets.
n Its short-term stochastic oscillator (on top) is overbought, so a minor pullback could occur at any time.
n Wait for a pullback to the R52/R51 level to buy.
n The first target (T1) is R58.80, based on the height of the triangle projected up. That is almost 10 percent higher than current levels. The second target (T2) is slightly higher than that, at R61.30, and is based on the recent price gap.
n Place a stop loss as a closing price below R46.50. Take at least half the profits at or near T1 (R58.80). And then raise the stop on the remainder to breakeven, that is, your entry level. Take remaining profits at T2 (R61.30).
Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za.