Elliott Wave Analysis for Sakari Resources Limited (AJ1) – 13 May 2012


Elliott Wave Analysis for Sakari Resources Limited (AJ1) – 13 May 2012

Sakari Resources is a coal producer and exporter listed on the Singapore Stock Exchange with operations in Indonesia. Recently, the share price of Sakari Resources has taken a beating and in this article, the Elliott Wave Analysis for Sakari Resources is presented to understand where the share price might be heading to.

The below chart depicts the long term Elliott Wave Analysis Chart for Sakari Resources. There are two main counts that can be seen quite clearly. The primary count is that Primary wave A and B has completed and Primary wave C is in progress. There are two targets for Primary wave C. The first one is 1.20 and the second one is at 0.3.

Sakari Long Term Technical Analysis Chart
Sakari Long Term Elliott Wave Analysis Chart

The Alternate count is that a horizontal triangle is in progress with the final leg E panning out. This is a bullish scenario and once the leg E is complete, Sakari Resources is expected to make a big bullish move well beyond the previous all time high.

The commodity stocks have taken a beating during the recent months and I am wondering if this is a sign of industry weakness as the demand for commodities will go down during recessionary period. This is one of the reason why the Primary count is a bearish view. In order to confirm this doubt, the long term Chart of Thermal Coal was analysed and the results are presented in the below chart. This chart was obtained from the Index Mundi website and can be viewed at http://www.indexmundi.com/commodities/?commodity=coal-australian&months=120.

Technical Analysis of 10 Year Thermal Coal Price
Elliott Wave Analysis of 10 Year Thermal Coal Price

The period is from Apr-2002 till Apr-2012. The price of thermal coal has been ranging below 40 USD since 1983 and broke above it in  early 2004. This break out can be labelled as wave 1 and I’ve labelled it as Primary wave [1]. This was followed by a corrective Primary [2] to retest the 40 USD level. After this, the price went up in typical wave [3] , a short corrective [4] and the final wave [5]. This whole move took about 5 1/4 years. What followed next was the corrective wave and the price of coal took a nose dive back to 60 USD which is likely the Primary wave [A]. This was followed by Primary [B] in an expanding triangle pattern. This pattern was broken to the down side and based on the widest part of the triangle, we can estimate that the target from the breakdown is around 80 USD.

I believe that Primary [C] is in progress with a target of 15 USD. This is based on length of [C] = [A]. But this would cause the price to drop below the starting point of Primary wave [1] and so the Primary wave [C] might end above the 22 USD level which is still a long way to go from here.

The Alternate count is a bullish count with the Primary [A] labelled as Cycle ii and the expanding triangle labelled as Primary [1] of Cycle iii. This count calls for Primary wave [3] to bring the price of coal well above the previous peak at 190. In this count, Primary wave [2] of Cycle iii is in progress and is expected to correct to around 80 USD region before snapping up in Primary wave [3] of Cycle iii.

As can be seen quite clearly, the price of Sakari is inline with the price of coal and currently, both the bullish and bearish counts points to a correction to 80 USD region before any price appreciation can be expected for coal. This will likely impact the price of Sakari Resources further and the opinion is that further price slide is very likely for the longer term. In the near term though, a relief rally can be expected. We would need to study the strength of the relief rally to determine whether the price has turned up or whether further weakness can be expected once the relief rally is over.

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About Shivakkumar Vadiveyl

Shivakkumar Vadiveyl is a blogger who helps Investors get better in Investing by publishing Articles on Investment, Retirement Planning, Gold, Silver, Stocks and Currency Markets. He uses Elliott Wave Analysis, Classical Trend Channel and Candlesticks as the Primary Analysis Tool.