Iluka Resources – a stock to explore, then buy?

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Iluka Resources Limited (ILU) is involved in the exploration, project development, operation and marketing of mineral sands. It is the largest producer of zircon in the world with about a third of the world market, and the second largest producer of titanium dioxide minerals.

In recent times, the company has cut production as prices for their products have fallen 25% to 35%, primarily due to weak property prices in the US and China.

This stock represents one that has been “beaten down” and a “buy” on the premise that economies will improve in the medium term.

A move to $12.38 is foreseen, and a “dip your toe” buy at these levels. Should the price go to $9.28, then a second parcel may be entered.

Falls below $8.88 ought to be viewed with caution and stop levels could be considered here. This is a volatile stock, and needs to be monitored.

Why do I like the chart?

  1. Selling that occurred between 7 May of 2012 to 19 November 2012 looks to have stabilised on a daily basis.
  2. Lows of 24 July 2012 at $7.72, and 19 November 2012 of $7.36 were rejected “nicely”.
  3. Indicators on a sort term basis look likely to cross the 200-day moving average (MA).
  4. The low of this stock was in week of 6 July 2009 at $2.70. It has continued to rise to an ultimate high of $19.46 the week of 18 July 2011. A rise of 7.2x.
  5. The retracement to $7.36 represents sufficient retracement to $7.28.
  6. Week of 19 September 2005 saw a then all time high of $8.05. This level is in line with strong support of recent times and supports the argument that a low ought to have been found.
  7. $12.38 is foreseeable technically, a rise of 24%.

What don’t I like?

  1. The price action is till below the 200-day MA
  2. The 200 day MA is still firmly pointing down
  3. $10.36 is where the 200-day MA is. It is close to that level implying that a “pull back” is due and possible around here.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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