Fortescue Hits Support

This story features FORTESCUE LIMITED. For more info SHARE ANALYSIS: FMG

By Michael Gable 

The focus here in Australia is clearly the Federal Budget tonight and what it means for the economy and our market. The prospect of another tax has weighed on discretionary stocks, and outside of the budget, the lower iron ore prices have kept a lid on iron ore stocks. However, we have a look at Fortescue Metals ((FMG)) today because it has fallen into an interesting support level here. The weakness in the market has also brought other stocks such as Crown Resorts ((CWN)) to attractive levels. Volatility is very low for our market, and we keenly wait to see where it wants to go after the Budget announcement. Although our market is looking defensive, the Dow Jones appears to have a few more weeks of strength in it.

Fortescue Metals

 

Our last comment on FMG on 25 February was fairly neutral as we noted some very strong resistance at $6, despite the break out from the downtrend in October. What we have seen since then is a clear pullback in the share price, making FMG over 20% cheaper now. This weekly chart shows you how FMG has settled right on the downtrend line. FMG therefore has the potential to rally from this level. Those looking to trade the stock here would not like to see it head back under that downtrend line. So a stop could be placed at say $4.50, which is about 5% away. Upside potential would have to be back into the $6’s in the next few months from now. This provides traders with a very attractive risk/reward.
 

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)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

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

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). 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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms