African Rainbow Minerals (JSE: ARI) has navigated a challenging landscape marked by declining profits, subdued commodity prices, and operational setbacks, which have impacted both its financial performance and market sentiment. The company reported a significant 43% decrease in half-year profit, attributed to lower thermal coal and platinum group metal (PGM) prices. ARM’s headline earnings per share (HEPS) fell to 15.07 rand, reflecting the adverse impact of the prevailing market conditions.
Furthermore, ARM’s decision to pause the expansion plans at its Bokoni mine underscores the company’s strategic response to the subdued PGM prices. The sharp decline in PGM prices, coupled with uncertain global economic prospects, has prompted ARM to defer key developmental activities, including a bankable feasibility study, in an effort to conserve cash and mitigate risk.
Overall, ARM’s future profitability hinges on the price movements of iron ore, PGMs, and thermal coal.
1-Day Technical Analysis
The daily chart shows that the share price is currently trading flat around the 200-SMA (red line), indicating a period of consolidation. Currently trading flat, the stock shows signs of recovery following a recent slump post-disappointing half-year results. Despite trading around the 200-SMA, the stock remains above the 50-SMA (blue line) and 100-SMA (orange line), suggesting a potential for upward momentum. Although the price remains above shorter-term SMAs, a sustained break above the 200-SMA is needed to signal a potential bullish trend.
A sustained push above the 200-SMA and the 38.20% Fibonacci retracement level would leave the 23.60% Fibonacci retracement level (18,696 cents) as the next level of significant higher. A sustained break above the 23.60% Fibonacci retracement level would leave the recent swing high of 20,300 cents firmly in focus in the near term.
With the RSI (54.85) sharply declining, continued bearish momentum at the could find significant support at the 50.00% Fibonacci retracement level (17,481 cents) lower. A decline below the 50.00% Fibonacci retracement level with significant volume could lead to a test of the 61.80% Fibonacci retracement level (16,816 cents) and the 78.60% Fibonacci retracement level (15,869 cents).
Summary
ARM’s share price is likely to consolidate in the near term as the market digests the recent profit decline and limited future growth prospects due to rail capacity constraints. A decisive break above the 200-SMA (18,100 cents) could signal a bullish move towards 18,696 cents and 20,300 cents. Conversely, a break below 17,481 cents with strong volume might open doors for further selling pressure towards 16,816 cents and 15,869 cents.
Sources: TradingView, Trading Economics, African Rainbow Minerals, BusinessDay, iol, Seeking Alpha.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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