Cup And Handle For Capricorn Metals

This story features CAPRICORN METALS LIMITED. For more info SHARE ANALYSIS: CMM

By Michael Gable 

What a big difference a couple of days can make. Market sentiment has massively swung the other way and many market participants are throwing in the towel.

Our overall view is that this is not the beginning of a large correction, but a short-term spike lower that will get resolved just as quickly.

Whilst US ISM Manufacturing PMI came in softer last week, and unemployment rose (a lagging indicator), overnight we saw a stronger than expected Services PMI. But that doesn’t fit the doomsday narrative so it’s hard to find any news items on that.

Central banks are in an enviable position with room to move on interest rates (as the bond market is now showing). And interest rate cuts (which at most a month away in the US) tend to spark rallies in risk assets.

Goldman Sachs may have raised its probabilities of recession slightly, but still rate it at only 25%. The large drop in Japanese markets is clearly a panic-driven “flash crash”, but ultimately, we are not going to see trillions of dollars of “carry trade” unwind on the back of a 25 basis point move in Japanese rates.

Markets will give a bit back every now and then. They can either do it slowly and frustratingly, or they can do it quickly. When they do it quickly, like what we have just witnessed, they will recover quickly.

Whether that is today, or in a few days from now, when the overall picture hasn’t really changed unexpectedly from a week ago, then you use these emotive moves to look for bargains and opportunities.

Today’s technical view is on Capricorn Metals ((CMM)).

We looked at the CMM chart last month and noted that it was trending higher again and remained a buying opportunity.

Since then, it retested the April high before consolidating again. Despite the stock not pushing on, the overall pattern is now resembling a cup-and-handle, which is a bullish formation.

It indicates that the stock is congesting near the old high, disposing of the sellers as it prepares for another move higher. CMM still remains a buy here and a break above $5.60 should lead to a move in the order of about $1.20 before we need to reassess.

Content included in this article is not by association the view of FNArena (see our disclaimer).
 
Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services. 

Michael is RG146 Accredited and holds the following formal qualifications:

Bachelor of Engineering, Hons. (University of Sydney) 
Bachelor of Commerce (University of Sydney) 
Diploma of Mortgage Lending (Finsia) 
Diploma of Financial Services [Financial Planning] (Finsia) 
Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
 

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