Mermaid Marine is a services provider to the offshore oil and gas industry. This stock (ASX: MRM) has been bouncing back continuously since it posted a low at $0.65 in last November (point A on the chart). It actually peaked last Monday at $2.45 (point B), and has corrected to $2.25 yesterday at the closing price.
The bullish trend between points A and B has driven the stock 277% higher in 8 months and a half. Oppositely to many materials, industrials or energy-related stocks that also sharply rebounded during the last months, MRM has climbed much higher than its previous highs of 2008.
Actually the price action could find some intermediary support now at $2.20, which is the previous historical top (point C) posted in early December 2007. As the price action has been spiking in unknown territory during the last 7 days, it is uneasy to identify a potential target on the upside. But because the indicators are reaching extreme high values, the most probable risk is currently on the downside. When you see the shape and the values of the MACD and the RSI, there is not so much further rise to expect indeed.
The Relative Strength Index is in the overbought area. From a peak at 78, it fell down yesterday to 73. Remember, a cross below 70 would be considered as a bearish signal and would open the door to a significative correction. Same thing with the MACD that reached an unprecedented high and has just started curving. The momentum has clearly weakened and a lower closed today (compared to yesterday’s close at $2.25) would probably confirm that a correction is likely.
As mentioned above the immediate support is $2.20. A consolidation there might be possible. But the most probable scenario is a pull-back towards $1.70 on medium-term. This is the target for the bears who will go short on the stock on the current levels.
The target of $1.70 corresponds to a previous high (June, August, September 2008 and also in last May) that became a new low last month (point D).
{ 0 comments… add one now }
Leave a Comment
Comment moderation policy: Port Phillip Publishing supports free speech and frank and open conversation. But we reserve the right to modify or delete your comments if we consider them to be offensive or in violation of any laws, including Australia's anti-discrimination laws