Hulamin Limited (JSE: HLM) finds itself at a critical juncture following a period of consolidation, poised for a potential shift in its trajectory. In its recent half-year earnings report for the six months ended 30 June 2023, the company showcased a remarkable surge in operating profit from R223.2M to R473.5M, consequently bolstering earnings per share from R0.47 to R0.95. However, despite this positive performance, there were notable challenges; group volumes saw a decline of 7% to 95,588 tons, while the average rand aluminium price dropped by 11%, resulting in a contraction in overall revenue from R7.96Bn to R7.40Bn.
The landscape for aluminium appears strained, evident from the chart below illustrating a 6% decline in the futures this year. These circumstances may present obstacles in the next six months. The pivotal question remains: can Hulamin navigate these challenges to revitalize its revenue and, in turn, restore investor confidence in its operations?
On the 1D chart, a symmetrical triangle has emerged, with the price pushing close to the dynamic resistance of the triangle, which is backed by the 50-SMA at R2.90. While this is a challenging resistance level to breach, the 25-SMA (green line) and 100-SMA (orange line) provide support close to R2.85, creating an intriguing technical setup.
A breakout above the 50-SMA could result in a retracement of the prior downtrend toward the Fibonacci midpoint at R2.95. Higher resistance at R2.97 stands in the way of a test at the Fibonacci golden ratio of R2.99, which could provide stern resistance to the breakout’s sustainability.
On the other hand, failure to move above the 50-SMA might trigger a selloff below the support at R2.85, causing a triangle breakdown. A demand zone is established at R2.80, which could hold some buyers, but a leg below this zone could result in a longer-term downturn, bringing support at R2.70 and R2.62 into the spotlight.
Hulamin Limited finds itself at a technical inflexion point after a relatively flat month of consolidation. The key levels to look out for are the 50-SMA resistance at R2.90 and support at R2.85, as a breach of either of these levels could trigger a breakout from the triangle pattern.
Sources: Koyfin, Tradingview, Hulamin Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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