For anyone with the capacity to (correctly) entertain higher-for-longer spot iron ore prices during the last 12 months, Fenix has been a spectacular place to land.

The uptrend, as expressed in part by the diagonal line that begins on the below chart at 15c in October, has underpinned a run that at its recent apex took the stock all the way to highs at 45c.

fenix ffx
Chart of the Day – Fenix (ASX:FFX)

During this time there have been a couple of retests of the broader uptrend, however whilst iron ore prices maintained their trajectory and as the company moved into production, it stayed intact.

Now that the iron ore price has finally succumbed to a more typical bout of volatility, Fenix has also experienced some significant volatility of its own, dropping more than 50% from the top, and this despite a reasonably clever hedging deal management struck that is already in the money.

We should on balance expect nothing less than meaningful volatility from iron ore stocks, especially those as leveraged in perception to spot prices (rightly or wrongly).

Given the size of the pullback in both iron ore and in Fenix in nominal terms, and with an excellent recent report under its belt, levels between 25 and 28c do make for interesting buying, complemented by a stop below recent lows.

31 to 32c if realised may present the name with some resistance in the short term, however if overcome, a move back toward 35-36c where the 50-day simple moving average currently sits would look plausible.

Beyond that, a retest of recent highs would not be out of the realms of possibility.

We are currently long within the IMA on the above basis and with a stop at 24.5c.

Steve Collette of Collette Capital Pty Ltd (ABN 56645766507) is a Corporate Authorised Representative (No. 1284431) of Sanlam Private Wealth (AFS License No. 337927), which only provides general advice.

Collette Capital only makes services available to professional and sophisticated investors as defined by the Corporations Act, Section (s)708(8)C and 761G(7)C.

The Collette Capital Wholesale IMA Strategy has returned +25.61% p.a. net of all fees as at the end of July 2021 since inception in January 2015 ( using the Time Weighted Return method of calculating returns ).

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