Zak Mir takes a charting look at some of the most closely followed small caps on the London Stock Exchange. Today’s charts are FTSE 100, DAX, Dow, Bitcoin, Ethereum, Gold, , Cadence, Eco Buildings, East Star, GEO, KEFI, Mkango, Mila, Mast, Oriole, Oracle Power.
Quick chart run-through for Tuesday, 21 October. A lot of markets have given us clear technical signals over the last few weeks, and today we have a mix of fresh rebounds, failed tests and a couple of ominous RSI readings to watch. Below I run through the major indices, crypto, gold and the small caps on my watchlist with key levels, support and targets.
As always, do your own research and treat these as chart-based observations rather than hard recommendations.
Major indices
FTSE 100
We have a fresh RSI 50 rebound. We saw a couple of these last month which pushed the market up into the high 9200 area. The bounce off the 50 day moving average at 9294 looks constructive and should be enough to retest the best levels around 9577.
- Immediate congestion: around 9480
- Support: 50 day moving average at 9294
- Best case: top of the channel 9680 by end of next month
- While above: 9280 zone remains the key to the bullish case
DAX
Back on the right side of the 50 day moving average after a gap down then gap up, which suggests underlying strength despite the market feeling rather dead. RSI sits in the low 50s.
- Near-term target: retest highs around 24,800
- Channel top: roughly 26,000 possibly as soon as the end of next month
- Key level to clear: 24,400 for a more convincing move higher
Dow
The Dow has cleared a notable resistance line around 46,200 and remains inside the rising trend channel from May last year. We have had two RSI rebounds, the second coming just below 50 but RSI is now in the upper 50s which supports further upside.
- Support on any rug pull: intraday 50 day at about 45,700
- Target: channel top around 48,200 by the end of next month
- Overall: above 46,200 the path to new highs looks viable
Cryptocurrencies
Bitcoin
We reclaimed the 200 day moving average near current levels (around 107–108k in the charts spoken about) and there is floor support from the March channel at ~104k. The worry is we failed at the 50 day and failed again at the 200 day, plus a second RSI 50 failure. That combination is more bearish than bullish.
- Immediate resistance: 50 day at 114k
- Key downside: if RSI failures continue, next destination could be June support around 98k
- Hold above 104k to keep the constructive channel intact
Ethereum
Ethereum has also failed to hold above the 50 day moving average at 4,278 and suffered another RSI failure. That increases the risk of breaking the April uptrend line around 3,740.
- Downside scenario: break to August support at 3,340
- Possible test: 200 day line at about 3,208 if pressure continues
- Conclusion: given current price action a move lower looks the most likely unless something significant changes
Gold
Gold experienced a rug pull at the end of last week but has recovered in a cork-in-water style reversal. The best case remains the red resistance projection line heading for 4,500 and that could be hit by the end of next month or sooner.
- Best case target: resistance projection near 4,500
- Rug pull risk: initial October resistance around 4,080 is a pullback target at worst
Stocks to watch
Here are the small cap and bulletin board names I covered today with the key levels and likely scenarios.
Cadence Minerals
- Regrouping looks to be progressing; trading around the second target near 3.9p
- Above old December resistance 3.2p
- Target: full retest of last month highs 6p plus by the end of next month
- Signal: RSI 50 rebound and need an end of day close through 4.2p for more conviction
Eco Buildings Group
This was one of the stocks of the month and has blown past earlier targets. We originally looked at 6–12p, then 9p, 14p and finally 20p. The shares have now pushed well beyond those levels.
- Resistance on the way up: around 26p (from this time last year)
- Above that: not much until 50p (old 2022 support)
- If you are bullish: key levels to note are 20p, 26p and 50p
East Star Resources
Decent announcement and a steady, slow progression. RSI 50 rebounds and support above a rising 50 day moving average.
- Support: 50 day at 1.84p
- Target: red resistance projection, top of the summer 2022 channel at 2.75p by the end of next month
GEO Exploration
Gapped through the rising 50 day line (around 0.33p) and is looking to retest last month’s resistance of 0.5p. Staying on the right side of 0.3p is important for the bullish view.
KEFI Gold and Copper
After a chaotic spike through 2p recently, the old October resistance around 1.35p is acting as a base. RSI remains above neutral 50 and we have had two bounces indicating support in the 1.2–1.3p zone.
- Best case: retest 2p and up to 2.4p by the end of next month while above 1.2p
Mkango Resources
The stock has been very strong and has run hard recently. We are toying with the old February channel top around 58p. Clearer levels above that look for a retest of the best levels through 72p and the lilac line towards 96p later in the year.
- Key support: initial October resistance around 50p
Mila Resources
Coverage continues because the shares remain on a bullish footing. RSI has been at or above neutral 50 since the end of August. We hit the previous target above 1.7p and look for 2.7p next month.
Mast Energy Developments
Mast is one of the more difficult names at the moment and has collapsed similarly to other hard-hit small caps. Price action is ugly and the shares are hanging on to the falling support line from July around 16–17p.
- If you like the shares, that 16–17p zone could act as a support for a bounce towards the 200 day line at about 42p
- But the current action remains very strange and volatile
Oriole Resources
Gapped up on a decent announcement, likely an MRE. The stock has moved above a rising 50 day line. Above 0.32p we can look for a retest of the main resistance from August/September around 0.50p by the end of next month.
Oracle Power
Trading within a couple of bands with target areas at 0.45p and 0.58p. An end of day close through those levels would encourage a bigger move up from 0.6p towards 0.9p.
- RSI bounced above 50 which has repeatedly preceded moves higher
- Watch closes through 0.45p and 0.58p for the next leg up
What to watch this week
- Keep an eye on whether the major indices can hold above their 50 day moving averages. Much of the bullish case depends on that.
- Bitcoin and Ethereum: both have failed recent tests of the 50 day, so a break below key channel floors would target June/August supports.
- Small caps: watch closes through the near resistance levels mentioned above. End of day closes are important for confirmation.
“While we are above the key 50 day lines in a number of markets, that remains the backbone of the bullish case. Failures at those lines and repeat RSI 50 failures tilt the probabilities to the downside.”
More updates tomorrow.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
