Admiralty Resources (ASX:ADY) is an exploration and production company with diversified mineral interests in Australia, Chile and Argentina. The company is involved in four main projects of iron ore, nickel, cobalt, zinc, lead and lithium products.

Since April 2007, the stock has been trading in a long-term indecision chartist pattern. Indeed, the long-term price action is building a triangle as the market was recently not sure of the future direction. The price action has tested both its support and resistance lines, failing to clear and go through them.

In last April and June, the stock rebounded twice on its support base (points C and D). This support comes from the previous highs posted in early 2007 (points A and B), and as previous highs become new lows, traders and investors consider that this level is an opportunity to buy back the stock.

On the upside of the triangle, the resistance line is built by the high prices (points F, G and H) posted since the historical high of July 24 last year at $0.67 (point E).

If the price action breaks out the upside line (Chart A), it is a “buy” signal, whereas it is a “sell” signal if the triangle is cleared on the downside (Chart B).

Chart A

On Thursday, the stock closed at $0.1955, not very far from its support level which is 20% below, around $0.1550. However the current price is above its price of May 19, when the equity indices started falling massively. It means that the stock is uncorrelated with the Australian benchmark.

The stock fell by 34% since the high posted only 22 days ago. Several indicators argue now for a rebound that may allow the price action to clear its resistance line and then trigger a new long-term bullish signal.

On the near-term, the 9-day technical Momentum indicator and the Stochastic Momentum Index show that the stock has been recently oversold and that a positive momentum is building. Price and volume closed higher which is a good sign that indicates that investors flow back into the stock.


Moreover, despite the recent fall, the medium-term moving average crossovers configuration is still positive. The 20-day moving average has crossed above the 50-day moving average in early June, and as long as it continues to move above, the overall configuration is still bullish.

What is expected on the near-term?

A new attempt to test the resistance line around $0.26 is likely. A significant break above this level would clear the triangle on the upside and would be a strong bullish signal.

On the opposite way, only a break below the support line therefore closing price below $0.15 would be a strong bearish signal.

This article is contributed by Money Morning. Click on the link below for more information and to subscribe to their free newsletter //20080714/a-look-at-admiralty-resources .html”

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