Copper miner Aditya Birla (ASX:ABY) posted a double-bottom two days ago, reader. A technical rebound is just about due. And it looks like a 50% gain from here.
The stock has been a violent mover since it listed on the ASX in May 2006. It traded between $2 and $2.70 for a year…climbed sharply up to $4.30 last October…then fell by 67% by January 23.
The price today? Well, it’s about $1.50. That means ABY has already bounced off the same support as last time. There’s your double-bottom.
But there’s something more interesting about this chart. The most appropriate indicator to pay attention to isn’t your average fare.
You’re looking at the Klinger Oscillator. What it does is help you pin down a bottom…the turning point where profits begin. But it also reveals how much money is flowing into a stock.
In this case, there are two key signals. Firstly, the Klinger has crossed above its signal line. Like the MACD behaviour, it’s a bullish signal. But more importantly, it’s doing so when price action is at a low.
Here the stock plunged into oversold territory (watch the levels of the RSI) and posted a historical low ($1.41 on August 5, point E on the chart). The Klinger failed to confirm this, dear reader. This means that bearish trend has been losing momentum and is nearing completion. Look for a technical bounce.
Where to?
Prices will probably test the Fibonacci retracement levels from the October 2007/January 2008 fall. Those levels still act as resistance points. Yesterday the price closed at $1.525. The first target will be around $2.10, the 23.6% Fibonacci level.
Only a break below$1.40 (closing price) would cancel this rebound scenario.
[Please note: neither the authors nor any of the employees of Port Phillip Publishing own shares in any of the stocks discussed in Money Morning. The articles do not give trading or personal investment advice, but are intended to provide a useful, independent news and analysis service to supplement your own investing and trading. Consult your financial advisor before making any investment decisions.]
