Interactive Investor

Where Sirius Minerals shares might bounce

9th February 2017 09:40

Alistair Strang from Trends and Targets

Sirius Minerals (LSE:SXX)

Sirius Minerals must surely come into the "dodgy" category for ISA contenders, simply due to the inability of rises to actually stick. From 2011 until 2016, it was actually appearing as if the market simply was not going to let it better 30p. Ever!

All changed in 2016 - or at least we thought so for a couple of months. Regular readers will know the price accelerated to our proposed target level of 49p from July 2016, even bettering it slightly on the day before opting to behave like a ramped AIM penny share.

What makes us nervous has been the intensity of reversal. In an ideal world, the drop should have bounced from 18.5p, but instead the price has managed to hover above and below this level like a politician's integrity while examining an expense receipt he found exploring a neighbours wheelie bin.

To be clear, if Sirius now broadcast bad news, it could easily slink to 8p in a blink. Worse, we cannot calculate below such a number currently without prefacing targets with minus signs. Perhaps the long term 'red' uptrend will be used to provoke a bounce around the 15p level. If there's any hidden strength, we'd hope this is the case.

Having given the reasons for our "dodgy" classification, where's the silver lining?

Our Trend Tool advises the price must currently better 28.351p before we dare take any rise seriously. There's nothing particularly clever about this calculation, it simply examines the numbers behind the 'blue' line on the chart and extrapolates the trend to a specific date.

In the case of SXX, this share apparently has until the end of April before it must show its hand, assuming the soporific price movements since last November continue. This results in the situation where the share risks being tucked up nicely in an ISA during the latest point where it must move.

Of course, sometimes (rarely) we're talking rubbish with these trend lines. If we've been watching the wrong trend, a price can simply sleepwalk through 'blue'. Usually, if the market intends a serious rise, the price will move through a trend a few weeks before our target date.

For now, we shall be slightly interested if anything manages to move the share above 20p as growth to an initial 22p looks sane.

Our secondary is more interesting, suggesting 26.5p and the potential of a challenge against 'blue' in the weeks ahead. Only with closure above 'blue' could we dare mention 40p and 60p in the same breath.

In summary, this one's a challenge, especially given the two circles on the chart where the price was manipulated downward last year.

If a movement from 20 to 22p triggers, we'll be watching fairly closely as anything bettering the initial 22p will be an indication of potential hidden oomph.

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.

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