Whitehaven Coal confirmed a stellar 12 month turn around with its half yearly results this morning. However, share market reaction has been a little nervous, leaving its chart precariously placed. Further weakness here could be a warning of a deeper correction getting under way.
In the 6 months ended December 2015, Whitehaven Coal made a profit of $7.8m. Skip forwards a year and its profit was $157.5m.
Even better for some shareholders, its share price currently stands at $2.86 compared to a low of $0.36 a year ago.
Of course, this has mainly been about the spectacular and largely unexpected, increase in coal prices that’s followed production cuts in China; Indonesia; the USA and Australia.
The chart below shows the Newcastle Global Coal Index which is one of the key prices for Whitehaven that operates 5 coal mines in North West NSW.
While the coal price is well above the lows of early this year, it’s also lost a lot of ground in recent months which is why Whitehaven’s share price has started to falter.
Whitehaven triangle pattern
Over the past couple of months, the Whitehaven share price has drifted sideways, forming a triangle pattern on the chart.
At this stage a clear break through the top of this pattern would be a potentially bullish development and this may still happen.
However, after the profit result today the share price faltered after a small and unconvincing move through the triangle resistance on Thursday. If it breaks the $2.81 support early next week, Thursday’s high is going to look like the classic false break, with the triangle resistance holding again.
A break below $2.81 and a 3rd rejection of the triangle resistance is potentially bearish behaviour. This could lead to a break of the triangle support and resumption of the downward correction that began in November.