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Tuesday, April 10, 2018

PMETAL: A Strong Rebound

Yesterday, PMETAL rallied strongly to close at RM4.38. The rally continues today as PMETAL broke above its intermediate downtrend line, RR at RM4.40. It went to a high of RM4.78. The next resistance will be the horizontal line at RM4.85. If it can surpass this level, it may go to RM5.00 or even RM5.25. What caused the strong rebound in PMETAL?


Chart 1: PMETAL's daily chart as at April 9, 2018 (Source: Malaysiastock.biz)

The answer is the sharp rally in the price of aluminium, as shown by the charts below. Aluminium may face resistance at the violated uptrend line, S1-S1 at USD2150.


Chart 2: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)


Chart 3: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)

The reason for the sharp rally in aluminium is due to the sanction imposed by the US government on Russian oligarchs for Kremlin's interference in US 2016 Presidential election and aggression in Crimea, Ukraine and Syria (here). The hardest hit is Rusal, a large aluminium exporter from Russia which is controlled by Deripaksa (here).

I think the benefit accruing to PMETAL is likely to be short-lived as commodity prices have a way of finding their equilibrium after a short interval. Unaffected producers may enjoy slightly better pricing term while affected producers will suffer a small disadvantage but not a total loss. Based on this, I believe the rally for PMETAL may run out of steam soon. We will have to wait & see.

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