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Sunday, June 18, 2017

Alumimium Stocks Looking Toppish (updated)

Aluminium stocks, such as PMetal, LBAlum, Tongher & Arank, have rallied strongly over the past 1 & 1/2 years.


Chart 1: PMetal & LBAlum's monthly chart as at as at Jun 16, 2017 (Source: ShareInvestor.com)


Chart 2: Tongher & Arank's monthly chart as at as at Jun 16, 2017 (Source: ShareInvestor.com)
 
When you pair aluminium price chart with individual stock price chart, you can see that the stock prices have rallied upward on the back of improvement in the metal price, and vice versa.


Chart 3: Aluminium & PMetal's chart as at Jun 16, 2017 (Source: Investing. com & ShareInvestor.com)


Chart 4: Aluminium & LBAlum's chart as at Jun 16, 2017 (Source: Investing. com & ShareInvestor.com)
 

Chart 5: Aluminium & Tongher's chart as at Jun 16, 2017 (Source: Investing. com & ShareInvestor.com)


Chart 6: Aluminium & Arank's chart as at Jun 16, 2017 (Source: Investing. com & ShareInvestor.com)

The reason why share prices of these aluminium companies have been rising is because their profits have risen in line with the price of aluminium. What may happen when aluminium price starts to come off?


 
Chart 7: Aluminium price & Aluminium Companies' Profits from 2010-2017 (Source: Investing. com)

If you study the aluminium price chart, you can see that aluminium prices could have make a top- especially after it touched the line, AB which has capped the price rallies in the past 5 & 1/2 years. The indicators are leaning towards a bearish outlook for aluminium:
  • MACD has hooked down
  • +DMI is dropping; -DMI is rising; and, the ADX is declining
  • Stochastic RSI is now in oversold territory, and may remain here for a while if prices should trend lower in a downtrend.

Chart 8: Aluminium's weekly chart as at Jun 16, 2017 (Source: Investing. com)

Based on the above negative technical outlook for aluminium, I believe you should avoid aluminium stocks or take profit if you have position in aluminium stocks.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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