Hi ZoomtasticPersonally I think $2.14 may have been only a...

Hi Zoomtastic

Personally I think $2.14 may have been only a temporary bottom, and CEY can easily return to that or possibly lower in the short term depending mainly on short term market sentiment related to the global economic recovery.

I'll share my thinking, using the charts & table below:



Firstly, I have superimposed on the CEY daily candlestick chart the price support/resistance levels that I think are important. I have defined the Feb & April lows as the levels that define the boundaries of the "economic armageddon" (collapse of the financial system) pricing that would be factored in to most stocks until around mid April, when the market started to change its sentiment and recognise that armegeddon would no longer occur. Having done that I believe the $1.91-2.06 range is a very strong support level for CEY, and I dont expect the SP to return to levels below that unless the spectre of global financial collapse again returns to general market sentiment.



Secondly, I use this price range for the basis of calculating my risk/return ratios for investment in CEY. comparing the expected price targets (i.e. resistance levels above current SP), and calculate the ratios to determine whether there is sufficient risk/return premium (which I have selected as anything better than a risk/return ratio of 3x, i.e. the return is 3x greater than the risk at that SP). I currently have $2.85 as my short term price target (< 3 months). As you can see from the table, a SP of $2.15 or lower meets the 3x criteria if I assume level 3a ($1.92) as the worst case SP scenario, but if its $2.06 then the expected return ratio is 7.8x if the target price is achieved (which I believe it will).

Thirdly, looking at the fundamentals, I believe CEY has been priced down because of the extent of its domestic supply as a % of total sales, and the effects that dumping of metallurgical coal on the thermal coal market has had on CEY's price for its thermal coal. This is a situation which should change in the short-medium term. Additionally, if you look at CEY compared to some of the other companies in the coal sector such as FLX, MCC and GCL, its SP has underperformed since November last year (see index chart below, comparing price movement relative to SP at Nov 20 08 as 100 for the index).



My conclusion therefore is that CEY is an excellent investment for the long term as there is very little downside risk but lots of upside potential. For the short term, I'll be very happy to trade CEY knowing there is a strong support just below the current SP range.

Dont forget this is only my view, and I'm an amateur like most people here, so I could be completely wrong.

Good luck, Sharks.