12/13 Copied comments I made in TB's REE blog into here - search for 12/13 below.
12/10/2010 Updated discussion and chart.
12/08/2010 Initial Discussion on Lynas Corp (LYCS):
Picking up a thread started with TB today about LYC action on ASX
Broke it today I guess.
Last 1.485 $ +/- -0.025 Bid 1.485 Offer 1.490
Open 1.515 High 1.540 Low 1.455 Vol 32,673,512
But you know, it almost looks like a banner formation there at the end, which is an interruption of an uptrend that should soon continue. However, it just completed one in the prior wave and this latest one has exceeded the lows of the prior one that did reverse to the upside, has exceeded the support that the prior gap may have provided, and the volume has *not* dropped off dramatically. So I don't think this is a banner that signals a reverse.
But we still might get a reversal as it looks, as best I can see on their chart, to be sitting on two prior supports. But without a declining volume in this area, it looks iffy at best. If it holds at that level on declining volume a reversal is more likely.
Going to my platform and taking look at LYSCF.
(Click to enlarge the chart)
The other is a rising wedge within the larger one, starting on the high of 11/11 and touching on the same high of12/1.
Rising wedges are a bearish indicator, but longer-term ones that last a few months or more.
Both of ours share a common support, begun on the 11/08/2010 low and having 3 touch points so far (origin, 11/16 & 11/23 lows), so it's a relatively strong signal if it is violated.
To stay in the trend, it ought to bottom today @ ~$1.48 (very close to the AUD$ close today) on falling volume and reverse in the next day or two. We've already had two days of identical highs and lows on falling volume, so it seems likely. Further, the lower Bollinger, $1.4943, the 50 day SMA @ $1.488 & the 20 day SMA @ $1.471 all portend support in that area. With the Bollinger falling and the others rising, if it breaks through the lower support of $1.48, it's a pretty strong bearish signal.
I don't think it will do it yet.
We'll know in 5 - 9 trading days (12/20) if the longer-term wedge is in play or not. Presuming the newer wedge is predominating, the longer-term resistance should be broken on or before 11/14 by exceeding the resistance which will be ~$1.61. If it doesn't reverse, it could still exhaust that trend by 11/20 and indicate the newer wedge is in control of pps.
Since 11/11 pps has made waves of higher highs and higher lows and has been trading in that short-term rising "wedge". This one only started 11/8, so barring some shock, it ought to run another month or more.
I think the older wedge will be shown inactive and the longer-term up-trend will continue.
12/10/2010 We have entered a sideways trading pattern supported by the most recent gap of 11/23-11/24 and a prior one from 10/5-10/6. Both subsequently provided support at this same price level, $1.46. And during the testing of this support, both encountered resistance at $1.50. You can see this, highlighted by a red arrow, from 10/6 to 10/8, and from 12/8 to 12/10 (so far).
Volume has been dropping during this latest occurrence, as it did on the prior.
On the 10/6-10/8 occurrence of gap support at this level, we made a breakaway gap up. However, that was a gap and sideways trading in an uptrend. The current occurrence is a gap in the uptrend while the sideways trading is in a down leg of a rising wedge. A rising wedge in this situation is bearish in nature. But since we have two potential wedges in play, as discussed in the 12/8 post, we don't know which is the prevailing tendency.
So we can't really estimate which way it's likely break when the sideways trading ends.
Normally I would decide that the support of the inner rising wedge has been violated and a break down is most likely. However, with two occurrences of support demonstrated at this level, it is less certain (and it is, in fact, never certain).
Looking for other technical indicators, we see that the 20 and 50 day SMAs are pretty much in the range of trading. So, not much can be ascertained from them. Support is right above the lower Bollinger band, so there is potential additional support from that. RSI is neutral and has flattened, momentum is slightly positive and trending up, OBV is flat, MFI is slightly negative and weakening, stochastic is entering oversold more firmly (a possible positive indicator), and the ADX and related are weak and weakening further.
So, there's no clear indication of a likely direction of break, However, I do feel that whatever break occurs will be fairly strong, possibly even a gap.
So for the time being, I'm leaving my stop loss @ $1.45. However, I will be checking the bid/ask Monday morning just before trading opens and possibly adjust it. If trading starts showing an upward bias, I will slowly move the stop loss up appropriate amounts.
Here's today's chart. Probably won't need another for a while as I expect we'll see a break soon, possibly Monday or Tuesday (12/13, 12/14).
(Click chart to enlarge).
12/13/2010 Comments from TB's REE insta.
(OTCPK:LYSCF): I've a mind to declare the "older" rising wedge officially dead as a technical indicator. The primary reason is that pps is usually expected to have a break one way or the other by the time 2/3 to 3/4 of the duration has passed in these sort of things.
Since the older one would hit the apex at ~44 days, we should have seen a break at 29 - 30 or 33 days, approximately. We went 35 days and got a break, but then traded sideways 2 consecutive days and have now entered the newer rising wedge again, which *does* overlap the older one.
Since the old one's apex is only about 4 days off, it's dead as an indicator of future behavior.
One caveat in these, and the following, thoughts. Dollar weakened quite substantially today and much of what we've seen might be a directionally inverse correlation to that action. So let's be alert to another reversal in (DXY).
What's this mean near-term? First, a good opportunity that pps will touch $1.61 tomorrow or the next day, because we had good volume (~4x 10 day average from yesterday) today and all technical indicators except momentum have flipped to *going* in a positive direction on today's good volume.
Second, we had a good "pop" back into range today, so we might get a small re-trace tomorrow, but that would surprise me, considering the publicity on CNBC (and elsewhere?). If it does re-trace, "reversion to the mean" should put us around ~$1.52, leaving us still sitting atop the support line for both rising wedges.
But I really expect to have a continued run for a day more, maybe two, due to the news, Chu's energy advisory council, markets generally not showing a lot of imminent weakness, ...
If that is the case, we will certainly break above the old resistance line of $1.61. If we close above just a couple days, it does confirm the resistance is broken. That's not to say it can't go below the support line again, but that the older resistance is no longer in play and we are more likely to trade within the boundaries of the newer rising wedge. So, we have ostensibly higher highs available within the rising range with "swing points" on the high side potentially at higher pps points.
Keeping in mind that these are "long-term" patterns, and should provide good returns over the next several months, barring negative catalysts, markets tanking, ...
The $1.80 high would be at risk of being violated badly, although we could/should certainly see at least a pause there.
After trading begins tomorrow, if we approach the $1.61 level, I'll be moving my stops up, likely to $1.52, a couple pennies below the where support will be then.
Do keep in mind that trading in a range, regardless of direction, does involve legs up and down repeatedly. We have just reversed off a bottom of one of those legs and should generally have ~5 days up now, I *think*, before hitting the *new* resistance (which my initial projection identified as 12/20, being ignorant at that time that we'd have 2 sideways days in the interval). We still might get there, and maybe on time if we have another excellent rise, but 12/22 would have seemed more likely. But *that's* right on the holidays start and volume and trading often tails off then, so it could take longer.
One last thought: with the tremendous rise we've seen since June, we could be establishing a new sideways trading range, which would have its support around $1.17 - $1.20. But I think it unlikely with the current market sentiment around the REEs.
I won't do a new chart right now - I want to wait some time and see if the new rising wedge converts to a rising channel, indicated by some lower price points of sufficient frequency and consistency to allow multiple pps contact points. This should take about three trading weeks, so mid-to-late January looks to be the earliest likely time frame.
I'm going to copy these comments to my LYSCF blog right now, so if you get a "stocktalk" on it, you've already seen it!