Frontera Resources: Should we expect the worst?

Frontera Resources (LSE:FRR)

Due to the volume of emails, we broke with tradition last week and provided an analysis againstFrontera, an AIM share trading below 1p. Due to the risk of accidentally 'enhancing expectations' we generally avoid such shares.

When we produced our report, Frontera was trading at 0.2775p. In the last week, it reached the dizzy height of 0.78p.

Attaining our third target level now looks improbable on the immediate movement cycle. We're fairly pleased at movements as they proved we'd been monitoring the correct trend (always a relief).

As the chart below shows, our target levels did as they're supposed to, giving a theoretical possibility of selling at each level, then buying in on a slight dip. In reality, market spreads probably made such an ambition impossible.

It appears something has now throttled the rise and we expect the worst. Hopefully this should be a reversal to 0.35p and a bonk against the ruling blue downtrend.

This shall prove critical, giving hope for the future and providing the basis for a longer-term rise, presumably based on positive news flow from the company rather than positive speculation on internet chat rooms.

If the share price were to close below the blue line, recent moves become yet another example of an AIM "Pump & Dump".

For us, moves did prove fascinating, once again indicating market software often finds it impossible to ignore triggering events. In the case of some shares, price moves can be rather swift. Unfortunately, in each direction!

We'll return to this share, but only if the price adheres to our prior requirement - closure above 0.8p - as it'll present some strong long-term possibilities.

For now, though, it remains trading in a region where Big Picture calculations provide an ultimate drop target prefaced with a minus sign. At time of writing, the share is trading at 0.615p.

Our usual method of gauging strength is to calculate a "what if" scenario. In the case of FRR, this requirement is: "What if the price betters 0.67p?"

If so, we're looking for an initial useless 0.74p, but, if this level is bettered, there's a strong chance the price has found a bottom and some further growth is coming. Who knows, it may even achieve closure above 0.8p and return to the realms of sanity.

GBPEUR (FX:GBP:EUR)

From our perspective, there's been a fairly major transformation in this relationship. Recently, we'd speculated this pairing should head to €1.068, but the pairing actually bounced at €1.074, a country mile away from our target in Forex terms.

But from our perspective, it hinted at some strength due to part of our projection method relying on whether a target is achieved or missed, along with the percentage variance.

The situation with GBP:EUR now is of movement bettering €1.145 starting a cycle toward €1.163 next with secondary, if bettered, at €1.212.

The pairing is no longer trading in a region where parity makes sense, so perhaps the currency markets like what the UK is doing. Or, alternatively, dislike what Europe is doing.

There's a key element about our secondary target. While visually €1.212 effectively matches the prior glass ceiling at €1.200, we're not immune from noting that achieving this level will imply a break above the glass ceiling.

About the only safe alternative is of any reversal now breaking below €1.087 justifying panic as parity once again rears its head.

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.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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.