FerrAus Limited (ASX:FRS) makes a living digging up three ingredients for steel: iron, nickel and manganese. Today, its chart has three subtle ingredients for a nice move upwards.
The stock took off last year, in April 2007. Prior, the stock was trading below 50 cents. In April it began to rise strongly, and hit a first high at $1.17 in July 2007.
All this good work was undone by the equity markets last summer.
FRS plunged back to 50 cents again. And there it stopped. The new low became the starting point of a long-term bullish trend. It drove price action to $2.02 in late May this year. Have a gander.
This bullish trend is backed by a support line that has been tested several times. All those points are higher lows. None of them are lower. And we think the line is still good.
That’s the first ingredient. A good support line. It’s like soup stock: a good base for the other ingredients. Going on other indicators alone would be dicey here without good support. FerrAus is just tickling that line now. It hit it twice in July, and bounced both times. It’s coming back for a third go.
The second ingredient in our tradin soup? A noticeable shift towards buying momentum.The 14-day Williams %R oscillator shows that price has quit an obviously oversold pattern.
The MACD has also bottomed and curved upward. It crossed its signal line yesterday. That’s a “buy” signal. And you can see how well the MACD has predicted the last two big moves, in April ’08 and August ’07.
The third ingredient is our target. We like the Fibonacci ratio for that.
The retracement points between points E and C are still in play. You can see the next resistance is at the 38.2% ratio, or $1.37. Yesterday it closed at $1.15. That’s a 19% potential rise.
However the main target here is the 50% ratio…around $1.47. If FerrAus moves as violently as it usually does, that could mean 28%. Potentially in less than a month.
As usual, only a break below the long-term support line would cancel out all this. If FerrAus falls below $1.05, you can throw out the soup. That’s quite possibly, considering the way equities are moving in tandem these days. But until then, this one’s worth looking at.
