Monday, 3 July 2017

Ivanhoe Mines (IVN): Breakout of Cup and Handle

 Fireworks for Ivanhoe on the Eve of 4th July 

I stumbled upon Ivanhoe Mines (TSX:IVN, OTCQX:IVPAF) when i researched for platinum miners because i wanted to have some exposure in platinum play back in early 2016. While it isn't a platinum miner (although it has some of it, or else i would never find it in my search), i was so glad to have found it. A perfect example of trading serendipity.

I listened to all, but believed in none (well, only a few exceptions). Rick Rule is one of such commentators that i would have some faith in putting my money to work on his stock pitch. He's a shareholder and has a lot of positive thing to say about IVN. For 1 thing, the company has the world's largest copper deposit, but when i looked at the price at the time of research, it was $0.85. I immediately knew it was very cheap. But then in early 2016, every miner on earth was in deep discount (because nobody wanted to touch commodity. That was of course the best time to back up your truck). Today (3 July 2017), it closed at $4.17.

Ivanhoe (IVN) price chart showing ATH and breakout
(Click image to enlarge)

I have traded it in and out of this stock 5 times since. I can't say i had perfectly timed trades. A few times, i bought and sold a bit early. Even so, i'm quite happy with my performance because this is my most profitable stock in 2016 because if i couldn't make money during the last 18 months incredible run of this stock, i should give uptrading. I just regret i didn't put all my money into it. But then, hindsight is 20 / 20. I don't put all my eggs in the Ivanhoe basket or any other basket. And Mr. Rick Rule never says he put all his money into this company. But we both should.

After a stunning run throughout 2016 and until mid-April 2017, it has reached an ATH = $5.40. This is followed by a 10-week bullish falling wedge / flag. It had just broken out of this flag today (3th July). While i would like to see large volume to convince me of this breakout, but i'm convinced enough that this is a real rather than a false breakout for the following reasons. As usual, i can be wrong.

1.  The $3.80 support has been holding up or basing for 4 weeks.
2.  The price is up today by an impressive $7.75% (Eve of 4th July fireworks). Largest green bar for awhile.
3.  It has already attempted a breakout a day before.
4.  Bullish technical divergences have been in place for a month.
5.  Copper prices (COPX, JJC) has been basing and recovering since May this year. IVN is just playing catch-up. It's actually 1 month late, meaning the catch-up will need to be fast and furious.

 A Steaming Cup of Hot Price Action 

While i can give you the next few short term approx price targets of $4.30, $4.70 and ATH of $5.40. However, i'm more interested in showing you the target of the cup and handle for this stock chart.

Ivanhoe (IVN) price chart showing cup and handle formation
The entire (weekly) price chat of IVN from Oct 2012 to 3th July 2017.
(Click image to enlarge)

Without much imagination, this is clearly a cup and handle pattern with ATH price being the rim of the cup. After running from a ATL (All Time Low) of $0.54 to ATH of $5.40, it's only natural and healthy to have a price consolidation in the form of a handle from the top of the cup.

It's then no coincidence that IVN starts this consolidation at the ATH of $5.40. Oh, by the way, the ATH / ATL ratio = 10x (approx). If you're the genius or lucky investor who bought at ATL and has been holding it, congratulation for owning a 10 bagger. It blew the Bitcoin parabolic rise out of the water in the last 18 months.

Depending where you want to measure the price target of this cup and handle formation. Some technicians measure this C&H price target by adding the height of this cup (CH = ATH - ATL = $5.40 - $0.54 = $4.86) to the Cup Rim (which is also ATH). Others determine the target by adding the height of the cup (CH = $4.86) to the point of breakout ($4.0 on 3th July).

So the 2 possible price targets for this C&H development are,

Price target 1 = CH + ATH = $4.86 + $5.40 = $10.26
Price target 2 = CH + Breakout = $4.86 + $4.0 = $8.86

C'mon, does it matter if it end up in $8.86 or $10.26? But i have a feeling that it would reach the target of approx $10 (which is somewhere between the 2 targets, and a nice round number that market loves).

The volume in this stock has increased considerably in the last 12 months, showing the growing interest in this stock. This also increases liquidity, which makes trading less jarring. The falling flag also accompanied by declining volume, another positive sign.

No comments:

Post a Comment