Nickel-Gold Miner poised for 100% rise
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Trade: High and Tight Flag (‘HTF’) that looks for 100%+ returns.
The last trade we identified like this went up 30% over the next three days – Clean Tec Holding
Trade Criteria: the HTF pattern is highlighted in black. There are a few key attributes that HTF need to increase the chances of seeing 100%+ returns:
- Strong flag pole; the vertical black line shows the flag pole and needs to have a 75%+ rise. S2R has more than a 100% rise which bodes well for a further 100% rise from today (1 point)
- The flag pole needs to be rapid with little interruption in the rise. S2R meets this requirement. (1 point)
- After the strong rise in the flag pole, there needs to be a reduce in volatility, which can be seen by the black triangle highlighted on S2R. The movement within S2R’s triangle could be more condensed, but does not negate the move, although more congestion in the black triangle is more supportive of a further move higher. (1/2 point)
- When the share price breaks above the black triangle the movement should be a strong, pronounced movement with a significant increase in volume compared to the prior two weeks. S2R shows a volume increase with higher volume in the orange circle, although yesterday’s trading performance could have been more convincing with a stronger close, closer to the highs of yesterday – see the far right of the chart near the red star. (1/2 point)
- Strong movements from companies in the same industry/sector/theme. S2R sits within two groups, which makes the success of this trade highly dependent upon identifying which theme is pushing S2R higher:
- Gold has been a strong theme, the leaders have been RRL and SAR, however this group have not been performing as well over the last few weeks and have seen fragmentations. Unless the leading gold companies turn back up, the chances of a 100% rise in S2R are reduced to some extent.
- Nickel mining companies have been running since late June. The leaders to watch are WSA, PAN, MLX, MCR and RVR as the canaries in the coal mine. (1 point)
For a checklist of early warning bells for leading groups and themes watch this video here
Read the 8 laws when trading gold companies here
Company snapshot: S2R is a mining company with assets of mining sites of gold fields and nickel sulphide.
Theme Background: S2R has a foot in two camps; gold and nickel. Gold companies on the ASX have been drifting back while S2R has been moving higher. S2R’s movement higher is more in pace with other nickel companies on the ASX which makes nickel the dominant theme for S2R on this trade.
4/5 points - or three criteria met and two criteria half-satisfied is a good start.
Statistically, having that support of sister companies doubles the likelihood of this chart pattern returning 100%+.
Given the strong movement in ASX-listed nickel companies, S2R is a great opportunity for the fast-paced, rapid trader who is diligent on stop losses and identifying theme criteria.
Note: this is not personal advice, conduct your own research and consult your broker to see if this trade is suitable for your own circumstances.
Christopher is head of equites at Spring Financial Group. Christopher has over 10 years' experience managing equities desks with thousands of retail clients and responsibility for maintaining and servicing retail and wholesale relationships.