How a 60% rally at Anglo American is 'very possible'

The price of Anglo American bothers us a bit as, despite the share's status on the markets, from a "big picture" perspective it is now trading in a region with an ultimate drop ambition to around minus 45p!

Last time we viewed this, we had given 280p as a drop expectation, but, for two months until February this year, the share price managed below our drop target fairly substantially. This results in the situation where any future moves below 280p risk seriously dire consequences.

However, the price has trebled from its lows earlier in 2016, managing to achieve a pretty impressive miracle by trading above the blue line on the chart, the downtrend since 2012. Or, in English: future oomph above 860p expects an initial 980p, but realistically a longer-term 1,240p looks very possible.

The cliché in the ointment comes from the red line, currently at 1,475p. This line dates back to 2002 and the break below in October last year triggered a seriously dangerous set of circumstances which allowed for a maximum drop level of 280p with no secondary.

As a result, we had hoped for a bounce to around the 280p level and this has certainly occurred, despite our target level being exceeded. If the share were on AIM, we'd now be braced for the worst, a feeling tempered with considerable relief due to the recent movement above blue.

From our perspective, it means the downward pressures have probably eased. But unless the share price recovers above 'red', we shall remain extremely cautious.

One glimmer of hope in the future will come with closure above 980p. Arithmetically, it means we can calculate a long-term 2,115p presents the ruling attraction.

For now, the price has twisted back on itself, needing below 685p to fail once again below 'blue' and justify a full workout of the eyebrows.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.