Folks need to cool down a bit and give the Friday rally another look. Be careful this could be a bull trap.
Let me be abundantly clear that I am the most outspoken advocator of the PGM bull camp. Some folks know me for a long while now. I am a bina fide bull, before I say anything below.
Granted, the South African mine shut down is a very bullish development in the PGM metal sector. The fundamentals of SWC and PAL can not be better. I have absolutely no doubt that both stocks will be moving higher, much higher, in the next few months andyears.
But after cool head prevails, I suspect that the Friday rally is overdone, and could be a deliberate manipulation with a little bit help from the news. It could well be a bull trap, folks!!!
Just look at the 6 months chart of SWC. Have we not witnessed enough of the roller coaster moves in just the last 6 months? Since Just Dec, 2007, we have three ups and then immediately three downs, and now the fourth up friday. All in less than 2 months of time span. Will there be a fourth down next week? This is an extremely rigged and distorted market controled by the manipulators!
The move on Friday is quite unusual. That brings back vivid memory of Aug. 8, 2007, right after SWC Q2 earnings conference call. We had a20%-30% up day but it was quickly taken down within 3 days. Have we learned a lesson?
The Friday move is unusual. South African mine shut down of course is a bullish breaking news. But no one should be surprised that South Africa is having problem with production for a long time, due to unstable electricity supply and safety problems. So nothing is surprising any more. Platinum and palladium has been moving up for months, so what else is new?
The whole morning, people have been speculating what caused the dramatic move. So regular folks are not the initial driving force, they just follow the rally trend. There is some up move pre-market but not much. If it was caused by SA breaking news, the pre-market move should have been more dramatic.
But the Bulk of the up move occured within the first 15 to 20 minutes of trade, after the market open. Obviously some one quickly jacked up the price to $10, depriving folks opportunity to buy below $10. Then the price is maintained around $10 for a long time, before the final hour rally further up.
I think some one deliberately triggered a heavy rally and then massively sell into the rally around $10. There had been two kick ups, shortly after 11:30am and shortly after 1:00am, when it looks like price could not sustain due to heavy selling.
My conclusion is this is yet another head fake rally to trap bulls.
If you are a firm believer of PGM bull, this should not be a problem for you. You would have loaded a few days ago in the low of $8, and probably sold some during Friday's rally. If it drops back you can buy back some.
But if you are a trader, the type that never dares to buy at the low, but will have to wait for a "confirmation" of a breakout, you probably stayed away at $8, and rushed in to buy at $10, and you will be forced to sell at $9 when they drop it next week.
So don't buy next Monday. Watch where they are bringing this to, then decide your next move. For folks already fully loaded, keep your core holding but maybe unload a bit on Monday.
The rally in PAL looks more natural and sustainable.
This has formed the pole part of flag and now needs to form flag part which should be near $9. Nothing goes up forever or in a straight line. Their will be profit taking and this run was a bit overdone. You must admit a 40% run in a week is due to pullback to 9 at least. This may of raised the platinum prices but this run had nothing to do with SWC's production or earnings. Thats why you should take profits now and buy back near 9. Any run no matter what stock or sector that runs 40% and is not related directly to co. should be careful with.
There is a basic reason for SWC to go higher. The problem for the South African miners is in the system and it will last for at least years. The problems are shortage and instability in electricity supply.
Sure, real news always brings in short-term traders to ride on the backs of investors. Sure there are plenty of signs of their manipulation. This does not change the fact that there is a problem in the system that affects African miners but not SWC.
Actually it was a bar trap. SWC had a high volume day last week and hit a new yearly low. Then it consolidated to let any weak hands sell out and then they trapped the shorts that got in on the breakdown. Yes its a setup cause it will go down but not sure how low. They bought some large blocks all the way to $10... They did not let any retail buyers in or any shorts to cover. As soon as a large block showed up to sell they bought it. Now we know this is one manipulated stock, no reason to think they wont manipulate it up as well as down. Once they get the shorts to cover I think they will take it back down too... They been doing this in all stocks, SWC just has wilder swings is all.