Magnetite Mines (ASX:MGT) is making holders some serious money.

After idling away below three tenths of one cent for most of 2020, the company first foreshadowed its potential with a sudden bout of buying interest in August of last year.

That move petered out in the high 1s, and whilst the company then went on to retest levels below 1c, the stock had moved onto some radars that have since proved material.

The exponential 200-day moving average held in late October as per the bright blue colour, and in the early days of the new and current calendar year, previous highs were swept away, and a powerful move commenced the rate of gain for which is only increasing as we move into the middle part of April.

magnetite asx

Since the start of March, the short term simple 15-day moving average as seen in yellow has done a decent job of supporting the stock.

At the time of writing, the market cap is moving toward $200 million, and so the law of large numbers might suggest that the next 200 is harder to come by.

Notwithstanding, in instances such as this where the move goes entirely parabolic, it is entirely plausible that the high print in the short term will surprise relative to recent activity in the stock.

Magnetite Mines is in the hands of the momentum traders and the tape readers now.

The absence of any gaps in the chart does add merit to the idea that the current move may surprise to the upside.

Ultimately, MGT finished the day with an eye-watering $22.7m worth of value traded at an average price of 6.6733c, an intra-day high of 7.7c, and a close of 6.8c.

They then received the obligatory ‘please explain’ from the exchange, to which they have played a straight bat, mentioning only recent announcements, along with ongoing buoyant pricing for iron ore at large and premium products in particular.

It’s not a recommendation at current levels, nor do we currently own it.

Rather, we will watch with great interest, to see if better levels can be had for an entry, levels with some context as to recent price action.
In that way we avoid simply buying ‘top right-hand corner’, where the risk return equation is typically far less favourable.

 

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 +24.57% p.a. net of all fees as at the end of February 2021 since inception in January 2015 (using the Time Weighted Return method of calculating returns).

Learn more at www.collette.capital

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