The Copper Find of the Century
Below, takes a look at Cudeco [ASX:CDU]. This is the stock that you may remember traded briefly at $10 in early 2006. At the time, the company found what it was spruiking to be the copper find of the century.
Things seem to have gone a little quieter for Cudeco since then, but now has dusted off his Fibonacci ratios to give it the technical treatment.
Is This the Copper Stock to Take Advantage of the Copper Rebound?
Cudeco Limited (ASX:CDU) is a mining company that specialises in copper exploration and production.
The stock has been trading in a channel since November 2006, roughly between $2.5 and $5. This channel is slightly bearish as its support line goes through lower lows over the time (points A, B, C, D and E).
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Despite a false break occurred in last January (point D), market players still consider this support line as the basis of potential rebounds. This is why the stock, since it has reached this support at $2.47 on August 11, has been bouncing back.
The upside of the channel was a resistance line that was built by lower highs (points F, G, H and I). This resistance was broken in last May, which was consequently a strong bullish signal. The stock jumped then from $3.78 to $4.69, which is a 25% increase, but fell back massively in the context of global turmoil on the equity markets. Following this intraday high price of $4.69 posted on May 28 (point J), the stock declined by 47% in a bit more than two months to eventually close at $2.50 on August 8 (point E).
The stock was oversold therefore it is considered as good opportunity to buy back the stock when it reaches a support level well indentified by the market. That’s why it has quickly bounced back until $3.09 (+23.6%) in one week but declined around $2.70 in the second fortnight of August. However there is a further bullish move possible.
The technical indicators that turned bullish on the rebound generated after point E remain well oriented. They are likely to convince investors that the bearish trend occurred between May and August (between points J and E) is definitely over. The RSI bottomed in the oversold zone but curved upward and crossed above its signal line. So did the MACD which is quite conservative as it avoids short-term false signals. They still show bullish signals.
What will be the next target?
A new attempt to breakout above the first intermediary resistance is possible as the price strongly jumped yesterday. This first resistance is the 23.6% Fibonacci ratio, where the recent rebound failed on August 15 (around $3.10).
If this first target is cleared, the next Fibonacci ratios will be the next short to medium-term objectives for the price action. Those levels are $3.35 and $3.60. On a longer-term perspective, the main target would be the upside of the existing trading channel, just below $4.5.
