JOHANNESBURG (Business Day) -- The time may soon be right for toe-dipping into platinum shares. Speculators would prefer to plunge and life-jacketed investors will continue to tremble at the shoreline, but noting the rand-dollar exchange rate and JSE platinum index wise investors will focus on the dollar platinum price.
Last week, for the second time, the platinum index staggered up from its oversold level only to flop back again, but the dollar platinum price clung grimly on to gains made in its second attempt to rise.
Had it not been for a sudden strengthening of the rand against the dollar, the rand platinum price and the platinum index would have ended the week on a positive note. After falling below the lower support on the overlaid Fibonacci arc, the platinum index rejoined the dollar and rand platinum prices in the lower section of the arc.
It's been a hectic year for platinum. At the start, the dollar platinum price rose 47.5 % in 63 working days, and since its March high dropped 22% in 150 working days.
During the same period, the dollar and rand platinum prices correlated fairly closely, showing the rand's value had little effect on the earnings of platinum producers. Yet, during that period, the platinum index gained 44.55%, then lost 39%.
Investors had reason to be suspicious of platinum when producers were deprived of electricity, but until the beginning of last month the dollar price dictated share values. The dollar price has fallen 15% since July 1 while the rand price fell 22% as the rand gained against the dollar.
Although the real takeoff did not take place until January, to give a better fit into the Fibonacci arc I have begun it in December, when platinum began to move better. All three plottings nudged through the top of the arc in March, and then lost 11% in 20 days, pushing the plotting down to the lower support of the arc.
From mid-January until March 20, the volume of shares traded was high as demand outstripped supply and then supply took over. In April and May, the index moved above the currency prices despite lower volumes. In June, when the rand lost substantial ground against the dollar, the rand price overtook the dollar price, but the index began sinking last month, and fell heavily well before the drop in currency prices.
While the currency plotting became oversold, share prices were far more so. Although the rand-dollar exchange rate varied from $1/R6.49- $1/R8.17, the currency plottings moved in unison, showing that the platinum price again had a greater effect than currency variations.
There were a few volume spikes in early July, but since mid-month, when the index and dollar price were forming a bottom, volumes have been above average.
Angloplat achieved record results in the half-year to June, headline earnings were up by 21% and the interim dividend was increased from R29 to R35.
A broken double top gives a longer-term count for the share to R1287 and while its Cycle Trends charts warns of a slight dip in the short term, the way forward is up .
The outlook for Implats also looks good, but there are worries regarding its Zimbabwe operations. Aquarius, Northam and Lonmin are well oversold but their Cycle Trends charts promise good lifts.
Sappi is attempting a lift from its oversold position, and is likely to gain more, and Mondi has given a buy signal. As Brent crude hesitates near R120, Sasol is nudging up from an oversold position and may gain more.
Dawn needs volume confirmation of its hesitant buy signal. Aveng has pushed into positive territory, but may pause before gaining more. Murray & Roberts may also pause but has a new count to R110.
Jean Temkin is the author of More Charting for Profit, a textbook on technical analysis and has interests in M&R.
