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Great stock trades based on fundamentals and technical analysis.

Friday, May 05, 2006

 

MMGG Cup & Handle Breakout

Yesterday, we discussed the fundamental reasons why Metalline Mining (MMGG) is such a great long-term buy in our valuation analysis update. Today, we'll discuss the technical analysis reasons MMGG is such a great buy.

After yesterday's breakout from a bullish triangle formation to a new yearly high on good volume, the daily chart is flashing buy signals on various indicators:


The weekly chart looks like it's going through a Cup & Handle breakout (http://www.stockcharts.com/education/ChartAnalysis/cupHandle.html):


With the depth of the cup at about $2.17, the Cup & Handle breakout target is over $5. That would be well above the 2004 high of $3.35 and the 2000 high of $4.35.

Given the change in fundamentals since 2004 and 2000, it makes sense that MMGG's stock price should be much higher now. The price of zinc has more than tripled since 2004, with the over $1.00 increase in the per pound price amazingly representing over $5 billion in future profits to MMGG if the price of zinc remains strong. As long as the price of zinc doesn't collapse below the 2004 price, the numbers for MMGG based solely on their zinc are staggering.

Silver and copper have likewise approximately tripled, so if Metalline can show economic grades of these metals, the upside is hard to imagine. Given the indication in the recent President's letter to shareholders that work on the silver/copper side has restarted, we should know fairly soon whether MMGG should be considered more than just a zinc stock:

"Work on the copper silver mineral system has been reactivated. The copper silver mineral system produced high grade direct shipping ore from 1906 until about 1995 from about 45 mines over an area of approximately 5 kilometers east-west by 1 kilometer north-south. The dump material from all of these mines has mill grade copper silver mineralization. There is underground access through these mines continuously for 5 kilometers east-west. Metalline explored the north side copper silver mineralization from 1996 to 1999 and has collected over five thousand channel samples from these workings that have economic grades, particularly at present metal prices. We are drilling and channel sampling this mineralization in the area known as the Polymetallic Manto that runs for a distance of about 1500 meters from the San Salvador mine to the Fronteriza mine parallel to the Iron Oxide Manto to the north. We are evaluating the data that has been collected and analyzed and will announce the results as this work progresses."

Looking at the fundamentals and the technicals, it seems Metalline Mining is destined for much higher prices over the long term.

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