Trade of The Week: Has Lonmin Bottomed Out?

If like me you’ve been trying to catch the Lonmin falling knife, you might be just about ready to throw in the towel. But you might be doing so at exactly the wrong time, just as the price has bottomed-out.

I’m not in the prediction business — especially about the future — but I think there are at least two plausible reasons to conclude that the price of Lonmin shares may now have bottomed out.

Reason #1

If you look at the following “big picture” chart (courtesy of InterTrader), you can see that the price of Lonmin shares is now at pretty much the same level as the low price of March 2009. This could turn out to be a technical support level; or you might simply think that “If things are no worse than they were then (and it’s a big IF) then the share price should go no lower than it did then.

Lonmin Share Price

Reason #2

Did you see what happened to the Lonmin share price at the end of last week? After having fallen steadily for some time, the Lonmin share price spiked up at the very end (and I mean the very end) of the trading day on Thursday 11 October. I took this as a good sign, so had no hesitation in jumping into a long position the next morning when share price opened right back down. The following InterTrader chart shows the price behaviour I just described:
Trading Lonmin Shares

The Trade

It’s not my only position in Lonmin, but here you can see in real life the token “exploratory” £1-per-point trade that I just described; opened first thing on Friday morning.
Apart from this position showing an immediate profit, what is even nicer is the fact that during the day on Friday I was able to trail my guaranteed stop order from a guaranteed loss (if it stopped out originally) of about £27 to now almost at break-even. Whatever happens now, I can only lose just a few pounds, and that’s guaranteed. On the plus side, and if I hold it as a longer term position trade, this could turn out to be anything from a four-bagger to a ten-bagger.

And finally…

It’s no accident that I chose to use InterTrader charts in this example; so I can remind you that you have just a few weeks left to take advantage of their 10% top-up offer on new accounts.

Two Steps to Better Spread Betting:

1) Buy the Better Spread Betting Book
2) Sign up with Capital Spreads, IG, ETX Capital, or Spread Co

Disclaimer: this posting is for general education only; it is not trading advice.