Over the past year Copper has been one of the strongest commodities that investors could have had exposure. During this time it has continued to be one of the strongest in our SIA Commodities Matrix. Of late copper´s strength has been replaced with that of Natural Gas and this new leadership appears to be affecting the types of equities that are dominating the top of the SIA TSX 60 Matrix as well. Most notable is the declines in relative strength of both First Quantum and Inmet Mining. In this week´s edition of ELW let´s review the charts of copper, natural gas and their comparison, which you will find below. Then let us review the charts of two old leaders, FM.to and IMN.to to demonstrate how they gained notoriety in March of 2009 and lost it of late, which you will find on the final two pages of the report.
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Natural Gas has pulled back after an attempt at resistance on its downtrend line. Currently, Natural Gas is testing support at $5.12 with resistance at $5.65 would suggest a potential test of the $6.12 level with room to move. We are reading into the strength of Natural Gas as a rotation from US Dollar-sensitive commodities like Gold, Silver, Copper and Crude into more domestic commodities like Natural Gas. This new leadership is being echoed through our SIA Equity Matrix Reports with the recent relative strength advances of names like Encana and Calfrac, to name a few.
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As we have seen above Copper has been declining vs. Natural Gas since September of 2009. This relative underperformance can be seen as a potential warning sign on Copper as it has been the strongest of the commodities since late 2008. Looking at the chart we have an obvious level of support that can confirm the relative weakness in Copper, a close below $2.91. Should this level be taken out we should expect a possible test of $2.64.
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First Quantum Minerals (FM.to) Reprint from March 4th, 2009
We first mentioned First Quantum on Feb 4th as it was moving up to the $27.00 range and at the time trading at $25.84. We wrote " FM.TO is approaching important resistance in the $27.65 to $29.34 range. A move above $29.34 opens the door for a test of $33.70. FM.TO is in a favored sector with strong technicals." That door was certainly opened and the stock has now risen another 30%.
The current chart on FM.TO is approaching another area of resistance at $35.07. A move above that level prepares it for a test of the bearish resistance line, which sits in $40 to $42 range. The first sign of trouble for FM.TO is a close below $29.93. Looking at FM.TO today, the chart still has strong technical attributes with a FMAX of 4 and is in one of the highest relative performing market sectors. Also note, First Quantum is in the #1 position within the S&P/TSX60 Relative Strength Matrix.
First Quantum Minerals Ltd. (FQM) is engaged in the production of copper, gold and acid, and related activities, including exploration, development and processing. These activities are conducted principally in Zambia, the Democratic Republic of Congo and Mauritania. Its operating subsidiaries are First Quantum Mining and Operations Limited, which includes Bwana Mkubwa, Compagnie Minera De Sakania SPRL, Kansanshi Mining Plc, Mauritanian Copper Mines SARL, Frontier SPRL, and Kingamyambo Musonoi Tailings SARL. Its segments are Kansanshi, Bwana/Lonshi, Guelb Moghrein, Frontier and Corporate. The corporate segment is responsible for the evaluation and acquisition of new mineral properties, regulatory reporting and corporate administration. It includes the Kolwezi project, which is in the pre-construction phase, and the Connemara gold mine in Zimbabwe, which is on a care and maintenance basis.
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First Quantum Minerals (FM.to)
For those watching the SIA TSX 60 Matrix Report in the past several weeks have no doubt noticed the sweeping changes that have taken place. The most obvious notable change of course has been the fact that First Quantum has now moved deep into the Yellow zone and in producing three negative technical attributes, 1. Neg FMAX 2. Neg BP and 3. Neg Chart Signal we have no reason to hold the position. This is in stark contrast to earlier in 2009 when First Quantum gave a textbook R/S Buy signal. We also view this R/S sell signal as a warning sign that there may be darker days ahead. Clearly we have seen names like Saputo, Enbridge and George Weston begin to replace the old guard, which are seen as defensive names overall. Also notable are Metro and Fortis, which have been building relative strength over the past several weeks. Again, we see a sell on FM.to as a definitive shot across the bow and one that should be taken very seriously.
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Inmet Mining (IMN.to) Reprint from March 4th, 2009
Inmet has been moving along with the copper price and the relative strength in the emerging markets. Having completed a series of higher tops since early 2008 in conjunction with underlying strength in the mines and metals sector, this chart is now poised to test a key level of resistance at $29.37 for the third time. A move to this level and beyond could see the chart test higher levels at $36.52 and then at trend of $50.13. Inmet has 3 of the 5 SIA technical attributes, is in a favored sector with a low BP reading. Inmet´s sector, Mines and Metals also has high relative strength. The wind is certainly at its back. Inmet is in 2nd position on the TSX 60 Relative Strength Matrix ...behind First Quantum, which is in 1st place.
Inmet Mining Corporation is a Canada-based global mining company that produces copper, zinc and gold. It own and operate mining operations in Turkey, Finland and Canada and have interests in mining operation in Papua New Guinea, a development project in Spain and a pre-development project in Panama. The operations of the Company are Cayeli, a mine in Turkey that produces copper and zinc concentrates; Payhasalmi, a mine in Finland that produces copper and zinc concentrates; Troilus, a mine in Quebec that produces gold; Ok Tedi, a company in Papua New Guinea that owns a copper and gold mine and Las Cruces, a copper deposit in Spain being developed.
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Inmet Mining (IMN.to)
Another darling in the SIA TSX 60 Matrix Report are the shares of IMN.to. Along with FM.to, Inmet gained a high profile in the market rally of 2009 as it moved to the top of the matrix and in doing so produced tremendous results for investors for the better part of nine months. Those days appear to be over as Inmet has also given a RS sell signal, having been replaced with more defensive names.
As it sits currently, support is at the$50 mark while resistance is at $56.46. Inmet has only 1 of the possible 5 FMAX scores and has lost all its positive relative strength readings against the market and peers. It also carries a negative BP reading and a negative chart signal.
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SIACharts.com specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment. None of the information contained in this website or document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. Neither SIACharts.com (FundCharts Inc.) nor its third party content providers shall be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon.
