Australian (ASX) Stock Market Forum

Zinc the metal for 2006

Jump to new
Howdy Niz, I know you are fairly bullish on Zinc (and with good reason), but I think caution, as Wavepicker points out, is the order of the day atm. The above article was from Basemetals ...... I also posted an article from Basemetals on the ZFX thread, which was slightly negatively slanted, so even their Journo's beg to differ ....... Here is another article on metals (incl zinc) .... certainly not Bearish, but considering ZFX has closed pretty much on its low 3 of the last 4 days, I'm treading carefully (as I know you do also) Cheers Barney.
http://www.lme.com/dec06-article1.asp#zinc
 
wavepicker said:
Interesting to see an article like that coincides with the peak in the bullmarket. At market tops you see these in abundace along with those of extreme optimism. At market bottoms all you hear is bad news and extreme pessimism, which although difficult is the time when you should buy. Now IMO is the time for selling!! Might be better to revisit Zinc when everybody comes to their senses.

Have a look at the zinc chart, I would tkae this article with a dose of salt.

Cheers
Click to expand...
So true wavepicker!

It’s like the apocryphal story of when you hear the Taxi driver, the local checkout person, your partner’s hairdresser, and your neighbour’s dog telling you to buy something…

You know that it’s probably time to "SELL”. – Because everyone who was going to buy probably has.

Who is “Myra Saefong” anyway? Anyone know anything about her and her capacity to call Zinc?

Can we please see more solid analysis here? I’d like to hear from the fundamental quadrant since I’m primarily a technical analyst, and have less quoting of obscure journalists who in turn are quoting obscure and unidentified sources labelled “analysts”. Can we please see more detail and rigour?


Regards


Magdoran
 
Magdoran said:
So true wavepicker!

It’s like the apocryphal story of when you hear the Taxi driver, the local checkout person, your partner’s hairdresser, and your neighbour’s dog telling you to buy something…

You know that it’s probably time to "SELL”. – Because everyone who was going to buy probably has.

Who is “Myra Saefong” anyway? Anyone know anything about her and her capacity to call Zinc?

Can we please see more solid analysis here? I’d like to hear from the fundamental quadrant since I’m primarily a technical analyst, and have less quoting of obscure journalists who in turn are quoting obscure and unidentified sources labelled “analysts”. Can we please see more detail and rigour?


Regards


Magdoran
Click to expand...

Point taken Mag, from my perspective, I have no knowledge to offer re zinc etc. other than what I read from these "analysts", and I would hope that since they are writing for "Basemetal's" site, they should hopefully carry some creedence (certainly more than I have) ...... My main reason for quoting their slightly "negative" slant was to give a balance re the continuing "over-positive" position of zinc often touted ....... I for one got caught in that euphoria just prior to the last "correction" and did my dough yet again :( It was actually a good wake up call, cause I've been doing well since (The old saying ..... Don't fall in love with a stock holds true) Anyway, that was my motivation for posting those reports.... to keep other "punters" balanced on their thinking, and not just accept that zinc, or any other metal, will continue up exponentially ............. Hope that makes the posts seem more appropriate...... All the best, Barney.
 
From a fundamental perspective zinc has simply got stronger through consolidation in recent weeks.
Anyone thinking that the charts tell the story for commodities has rocks in their heads.
Ask any chartist 12 months ago what the nickel price was likely to be today: If you are lucky enough to find a forecast it could have been from a certifiable lunatic who tipped a doubling in price, and still was still below the mark.
Yesterday BHP closed Century indefinitely while investigations into a death are made: Cannington is the biggest producer of silver, lead and zinc in the world.
A week ago a concentrator mishap knocked off 8,000 tonnes from Zinifex's annual output.
Overnight drawdowns from LME warehouses accounted for 300 tonnes and a further 850 tonnes went into the cancelled category - there were no inflows.
The impact of Cannington and Zinifex takes weeks to hit the consumer market proper, so further and prolonged tightness can be expected: Key market monitoring groups are not forecasting zinc to come into balance until 2008.
While I believe it unwise to buy into zinc equities because their prices are overextended right now, I would not be surprised to see them tack on another 10-20% by end of the March quarter 2007.
 
rederob said:
While I believe it unwise to buy into zinc equities because their prices are overextended right now, I would not be surprised to see them tack on another 10-20% by end of the March quarter 2007.
Click to expand...

so you reckon not much more upside to ZFX, PEM, CBH, KZL from here on in?

thx

MS
 
rederob said:
Ask any chartist 12 months ago what the nickel price was likely to be today: If you are lucky enough to find a forecast it could have been from a certifiable lunatic who tipped a doubling in price, and still was still below the mark.
Click to expand...

I think it's quite a challenge to find anyone who can forecast with accuracy what prices will in 12 months, whether it be a chartist or fundementalist. IMO I think the trend will be down starting early next year. Having said, throughout the years I have noticed however that it's the movements in the markets that precede the fundementals and not the other way around as most think. IMO they are not causing the market to move but are an effect of the psychological trends within the market. The only exception being very long term foreseeable fundemental events which account for 75% of all price motion. This however is very smooth and slow changing.



rederob said:
While I believe it unwise to buy into zinc equities because their prices are overextended right now, I would not be surprised to see them tack on another 10-20% by end of the March quarter 2007.
Click to expand...

Ofcourse, anything is possible in the market. However if we trade we must think in terms of probabilities. Trade what you see on the chart, it doesn't lie, not what you want to see or expect.

Cheers
 
wavepicker said:
Interesting to see an article like that coincides with the peak in the bullmarket. At market tops you see these in abundace along with those of extreme optimism. At market bottoms all you hear is bad news and extreme pessimism, which although difficult is the time when you should buy. Now IMO is the time for selling!! Might be better to revisit Zinc when everybody comes to their senses.

Have a look at the zinc chart, I would tkae this article with a dose of salt.

Cheers
Click to expand...


I do agree.
In fact Iv sold out of my zinc equities several weeks ago, and they ie. CBH and KZL are still sitting below my exit prices.
 
wavepicker
You know full well that what apears on the chart is a trend or price or indicator "after the fact".
Your opinion and mine are definitely at odds, so one of us will not be right: In the event I am wrong, I will lose a considerable sum of money!
I am clearly saying that the zinc market remains in a bullish state and that it is presently in a period of consolidation - pretty normal given the overbought status it achieved about a month ago.
I would be very surprised if the trend for zinc changed in the next 6 months, and believe it likely to tighten further through most of 2007.
I expect zinc prices too easily achieve $5000/tonne in 2007 and a rise to $6000 seems probable unless the US experiences a major downturn.
These expectations are simply based on the capacity of miners to get metal to refiners, and consumer demand in 2007 continuing to outstrip supply.


nizar
I tend to be a bit more conservative with my forward price estimates, and while I said 10-20% I believe these to be the most reliable "guesses" I can come up with seeing I have no capacity to tell the future.
My view on investing is that I would rather put money on something expensive (in blue sky) that I thought had a chance of a 20% rise in 3 months, than something cheap that I was unsure of, but "hoped" would retrace to a former high.
To demonstrate, last week I added to my holdings of PDN.
 
Hi Rederob,

rederob said:
wavepicker
You know full well that what apears on the chart is a trend or price or indicator "after the fact".
Click to expand...
With regard to indicators very much so rederob as they are lagging, totally agree with you on this. However IMO short to intermediate term(6 months to 1 year) fundementals are also lagging. They follow the psychological trends as reflected on the price charts. As you know fundementals can change pretty quickly.
Our job is 1/ To determine when a trend is in place my analysing the pattern of the trend as represented by the pictures painted by price movement in a chart, 2/ To trade and stay with that trend until it is at risk of ending

Lot's of valuable information can be gleaned from charts, information about the way insiders are buying or slowly selling out(although this is probably more relevant to stocks as commodity markets are too large)

rederob said:
Your opinion and mine are definitely at odds, so one of us will not be right: In the event I am wrong, I will lose a considerable sum of money!
I am clearly saying that the zinc market remains in a bullish state and that it is presently in a period of consolidation - pretty normal given the overbought status it achieved about a month ago.
Click to expand...

If you have a large amount of $$ at stake rederob then I hope I am wrong because I have non and therefore nothing to lose.
I understand that you remain bullish zinc and it may well have some minor subdivisions uncompleted before anything major happens. I don't think zinc is consolidating but rather "blowing off" and I think will be back to 3000-3500 within 12 months

Fundementals aside however, isn't it interesting that the metals booms as a whole has happened while the USD has gotten smashed. The 2 are opposite each other. Now what if the USD was to say rally for 1 year, do you think this would a profound impact in the way metals are trading in that time??

All the best
 
wavepicker
There is a key difference between a mineral commodity and an equity in terms of trend picking.
A company can hive off a loss maker, or inept management, and turn things around relatively quickly through its own measures.
Minerals producers sell into global markets and are reliant on demand trends and other suppliers that take risks similar to theirs, possibly on another continent.
The supply chain is long, slow, and relatively transparent: There are no "big" surprises. If we found another "Century" mine it would be many years before anything came onto the market.
There are many small-bit players that are trying to fill the gaps across the many booming metals that are in demand. They simply have no hope, but will likely profit handsomely.
Charts are not useful IMO at this juncture because the most likely situation we are at is that of "increased tightness" in zinc, not a move to balance and certainly not a trend to restocking.
Indeed, as the price of zinc has been increasing, consumers have been drawing down on their inventory in the hope that the tide of higher prices through LME (which is the industry price setter and has transparent warehouse data) would turn.
True to form, when zinc went into backwardation at a price that made delivering into spot a more desirable position than holding inventory, LME (in recent weeks) has began to receive inflows of metal on a more regular basis than anytime in the past year. This trend will continue, as backwardation offers a good price premium to those chancing their arm with any "spare" metal.
"Destocking" zinc is all good and well if you believe you can turn the market around. Note that the Chinese have achieved this through the intervention of the SRB in the global copper market. And the Chinese are presently trying the same for zinc except they do not have a strategic reserve to rely on - just some short term capacity to deliver some excess metal to spot.
It is my view that most of 2007 will be characterised by an underlying theme of zinc destocking, occasional metal inflows, outpaced by overall outflows.
This theme is supported by global trends that have been in place for some years, and the reasonable expectation that conservative growth scenarios pan out in 2007.
For the past 2 years the majority of lesser informed analysts have simply adopted a view that the market has "peaked" and has to fall next year.
It is a view based on the fact that all bull markets come to an end.
I agree that this bull market will unravel, too.
However, I presently see the weight of evidence pushing zinc to a much greater high in 2007.

In relation to the USD, good point.
Don't know the answer.
If one were to rely on "trends", then the USD has further to fall.
So will the trend of continuing higher commodity prices match the ongoing inverse relationship?
And if not, at what price point of the USD will the relationship end?
 
rederob said:
wavepicker
Charts are not useful IMO at this juncture because the most likely situation we are at is that of "increased tightness" in zinc, not a move to balance and certainly not a trend to restocking.
Click to expand...
To the contrary rederob, at this juncture, the chart is very useful. It's almost identical in form and structure(although not magnitude) to that of Gold in May just before it got smashed falling from 730-540. Back then the fundementals where calling for higher prices by years end to over $800, where they not?

What where your fundementals telling you back 1999-2000 about zinc, gold and metals in general, probably not much but a sad state of affairs. I remember the negativity for example in Gold back in 1999 at the height of the dot.com boom when it was touted as a financial relic of no commercial value.
 
wavepicker
There is no "tightness" to the gold market.
Under a present "Agreement" some 500 tonnes can be sold to the general market by Central Banks each year.
So Central Banks can manipulate the price till the cows come home.
It is difficult to "manipulate" a commodity in demand to the extent that zinc is, with such a small market it plays to.
There is no zinc ETF, and outside of LME there is no regulated zinc market.
A more reliable chart to compare zinc against is that of copper a year ago, or of nickel, but certainly not one of gold.
These are commodities that zinc is paralleling on a "lagged" basis.
If you were ever at the Comsec chat site 4 or 5 years ago you would have seen me posting about the impending influence of China and India on our markets.
I was a little late buying into gold equities (early 2002) because I did not understand how "hedging" affected stock prices and profits: I do now.
I think I have a reasonable understanding of commodity markets for an interested investor, but not a "professional".
Accordingly, I will err from time to time.
However, I present my views on zinc based on fundamental drivers that are well in place and only likely to change in the medium term if there is a substantial change to global markets. Typically my successes are within an 80% probability range.
 
nizar said:
I do agree.
In fact Iv sold out of my zinc equities several weeks ago, and they ie. CBH and KZL are still sitting below my exit prices.
Click to expand...

i thought you said you want to hold KZL for the ong term?

thx

MS
 
Are december trades low due to the christmas season with people away and enjoying themselves and family? Companies closing or slowing trade with a 1 - 2 week period off? Would this seasonal trend follow across all trades.....except Santa visits. :confused:
 

I was a little late buying into gold equities (early 2002) because I did not understand how "hedging" affected stock prices and profits: I do now.
I think I have a reasonable understanding of commodity markets for an interested investor, but not a "professional".


Howdy Rederob, Question from me personally, but I am sure other newcomers will be also interested ...... Would you be able to give a brief (or long :) lesson as to how hedging does affect stock prices? This would be V interesting .... Even a reference to a site/literature etc. with good info would be appreciated. Thanks, Barney.
 
rederob said:
My view on investing is that I would rather put money on something expensive (in blue sky) that I thought had a chance of a 20% rise in 3 months, than something cheap that I was unsure of, but "hoped" would retrace to a former high.
To demonstrate, last week I added to my holdings of PDN.
Click to expand...

Agree 100%. I invest in very much the same way. Gotta love blue skies :D

Rederob and wave thanks for the excellent thought-stimulating discussion.

MS - i dont really have long-term holds anymore. Riding long-term trends yes i dont mind (actually this is preferred), but im only willing to give back a certain (pre-determined) extent of profits, and nothing more, to stay in the trade, no matter how good the fundamental outlook.
 

Similar threads

M
SDV - SciDev Limited
75 76 77
Replies
2K
Views
194K
Dona Ferentes
Dona Ferentes
Top