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Lonmin, LMI (OHLC, Monthly)
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Welcome to the Trading.co.uk Technical Analysis reports. This report will follow Lonmin, which is in the FTSE 350 Basic Resources Sector. All of our Technical Analysis reports will follow the format of starting at the monthly graph, then moving down to the weekly graph, and only then down to the daily outlook.
This long term chart shows us how Lonmin has under-performed the FTSE 100 in recent months. As its moves off the 2008 lows failed to break the 38.2% retracement area, grey lines, and the current price action is indicating that the expected move back to the 0% retracement line is due ahead. Showing us how the stock is significantly underperforming the wider mining sector.
Leaving a clear long term underperform stance. The long term value investor however may start to think of buying on weakness at these depressed levels. But we would rather wait for any moves above the 38.2% level to indicate any long term growth opportunities were due ahead.
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Lonmin, LMI (Candle, Weekly)
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The Weekly chart suggests a possible reversal pattern, blue lines, with an RSI failure swing. Where the price action posts a lower low, but this is not matched with a lower low in the RSI, while being oversold.
The RSI is a non trending indicator and the stock clearly has been in a bearish trend over the past year, orange line, so the pattern is less significant than the ‘ideal’ pattern. But traders waiting for an ‘ideal’ pattern may miss opportunities in the interim.
So on the basis of the Failure Swing you can see an argument for moving into some medium term long positions, stops around the recent lows and targets around 1300 offer decent enough risk/reward. But this is contra-trend and not for the risk averse.
Traders may prefer hunting around the sector for miners to enter into a pairs trading with. IE buy Lonmin verses shorting another miner, or even a Buy Lonmin sell FTSE trade may be viable looking for the current divergence to unwind.
Leaving an opportunity for a number of possible trades, up to the traders discretion, and for the active only as it has been amongst the worst performing stock in the sector.
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Lonmin, LMI (Candle, Daily)
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| Charts courtesy of Updata |
Drilling down to the daily chart, we see how the underperformance continues as the stock posts a near term bearish trend, blue line, against the comparable bullish trend set up by the FTSE over this period.
The current levels do not look that attractive for fresh shorts, leaving more of a stand aside, underweight, stance here waiting for the bearish trend to break before looking to go long, otherwise avoid.
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FTSE 350 Basic Resources Sector Constituents
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Code
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Sector %
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FTSE 100
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| Rio Tinto PLC | RIO | 26.56 | Y |
| BHP Billiton PLC | BLT | 21.73 | Y |
| Anglo American PLC | AAL | 16.05 | Y |
| Xstrata PLC | XTA | 11.53 | Y |
| Randgold Resources Ltd | RRS | 3.44 | Y |
| Antofagasta PLC | ANTO | 2.47 | Y |
| Johnson Matthey PLC | JMAT | 2.05 | Y |
| Fresnillo PLC | FRES | 2.05 | Y |
| Glencore International PLC | GLEN | 1.87 | Y |
| Eurasian Natural Resources Corp PLC | ENRC | 1.35 | Y |
| Croda International PLC | CRDA | 1.22 |
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| Lonmin PLC | LMI | 1.11 | Y |
| Kazakhmys PLC | KAZ | 1.05 | Y |
| Mondi PLC | MNDI | 0.88 |
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| Vedanta Resources PLC | VED | 0.86 | Y |
| Petropavlovsk PLC | POG | 0.73 |
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| Centamin Egypt Ltd | CEY | 0.61 |
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| Victrex PLC | VCT | 0.53 |
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| Kenmare Resources PLC | KMR | 0.5 |
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| Aquarius Platinum Ltd | AQP | 0.41 |
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| Hochschild Mining PLC | HOC | 0.39 |
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| African Barrick Gold PLC | ABG | 0.35 |
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| Elementis PLC | ELM | 0.33 |
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| Ferrexpo PLC | FXPO | 0.29 |
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| New World Resources PLC | NWR | 0.28 |
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| AZ Electronic Materials SA | AZEM | 0.23 |
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| Yule Catto & Co PLC | YULC | 0.22 |
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| Talvivaara Mining Co PLC | TALV | 0.22 |
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| Allied Gold Mining PLC | ALD | 0.16 |
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| Anglo Pacific Group PLC | APF | 0.16 |
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| Gem Diamonds Ltd | GEMD | 0.16 |
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| Carclo PLC | CAR | 0.09 |
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| UK Coal PLC | UKC | 0.05 |
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| International Ferro Metals Ltd | IFL | 0.04 |
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| Anglesey Mining | AYM | 0.02 |
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| Namakwa Diamonds Ltd | NAD | 0.01 |
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Sector information compiled from Bloomberg – November 2011
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