Hi Pisces,
I’ve had a bit of a look at MND for you for a lazy Sunday afternoon. It’s a stock I’ve traded in the past but not for a while, last time was around Jan 14 when I unsuccessfully tried to short it from around the $17 level. Even though it’s fallen heavily since, it quite a volatile and choppy stock so you get stopped out all the time and it’s difficult to trade. What that tells me is that it’s had a lot of hot money, short term traders influencing it versus more stable fund money. Also means that to get a clearer picture of where the stocks headed you need to look at the bigger timeframes on the monthly chart, which I’ve put up below. Not worried too much about the weekly although I had a look. (I never bother with daily charts anyway).
Firstly, just looking at the Monthly without any markings, it looks bearish and heading lower.
To try and analyse that a bit further, a few tools are relevant:
Elliott Wave: Only loosely aligns with normal extension/retracement levels but the patterns are nevertheless pretty clear. Without going into too much technical stuff here as you don’t follow EW, it suggests one more leg down.
Trend and Trend Lines: The trend is down and it’s under a confirmed downtrend line on the weekly chart. I’ve marked a down trend line on my monthly chart below in a dotted orange line. That’s dotted as its provisional and not confirmed yet on the monthly until it closes below $8.37. If that happens the monthly down trend line is strong and hard to break and suggests further to fall .
Price Levels: It’s already dropped through 50% of the All Time High (ATH) level, so next strongest level is around 25% of the ATH at $7.00. Next horizontal natural support level is also at $7.00. Other support at lower levels, but nevertheless enough to give it a bit of a bounce around here.
Weekly Chart Countertrends and Volume: That spike at the end of March was 7 bars up from the low, which is common for a counter-trend rally, before failing. The high volume and volatility spike on the weekly chart also suggests a counter-trend rally completed here bringing in new sellers.
Cycle Analysis: This takes a couple hours of work which I haven’t done, but a quick look suggests something like a 24weeks primary cycle is occurring with the March spike the first part of a left sided bearish pattern. This would take it down to the next low around July 15.
The Bull Case: There's not much of one. It’s in a little consolidation phase here around the 38.2% ATH fib level. If it can continue sideways for a while and build a base it has a chance, but the balance of probabilities are against it at this point. Needs to stay above the recent low of $7.87 or if breached then just stand back and let it fall.
Technical Conclusion: This is going lower. At least one more leg down to $7.00 around July 15 is a reasonable expectation. Could still go another leg down after that but I want more information before calling this, bottoms are too uncertain to pick precisely anyway and can make you look a bit foolish, but the drop to at least $7 looks a pretty safe call.
Whenever if ends, after more than two years down, it will want 6 months to a year sideways action to build a base before any uptrend, i.e. maybe the end of the year might be worth a look again, but you want it to prove it’s in a new uptrend before entering.
Fundamentals: Pisces, you’re a sell in May and go away guy. As per my first paragraph, with a bit of retail money likely in this and a lot of losses over the past two years, then you would expect some tax loss selling to occur this June. That supports my technical thesis of another leg down to $7 by July.
Summary: Go do something else if trading long. Have a look again at this in June for a bottom pick, but the balance of probabilities are for 6 months plus before a long investment position could be safely set up. Note, I’m talking probabilities only, there’s nothing precise in trading.
View attachment 58628
Comparison Chart: Sims Metal Group
I’ve also added a monthly chart for SGM below to try and show what I think will happen with MND.
Both charts fell through the ATH 50% level, retraced towards it, then continued down to the ATH 25% level (SGM falling below it).
SGM Wave C shown in Pink, had 5 subwaves down (marked in black) which is text book.
I haven’t marked the subwave on MND, but the equivalent Wave C on MND is marked in dotted black. There are so far 4 subwaves under it, and I’m suggesting a final 5th wave down to the 25% level as per SGM.
SGM fell for 48mths, then after such a big fall, had to consolidate sideways for exactly half that time of 24mths, before breaking back up through the ATH 25% level and building a case to go long again.
Btw, I’m not currently in SGM as I’m trading some shorter term things, the SGM looks a good long play if you’re a long term investor atm.
Hope that helps.
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