The Alpha Trader

PARAGON UNION BHD (9407) - A PROXY FOR ALUMINIUM RALLY

TheAlphaTrader
Publish date: Sun, 21 Apr 2024, 10:23 PM
With over 20 years of trading experience in financial markets, this blog is intended to share with fellow traders how I identify good trade setups from a combination of fundamental, technical and situational considerations

Aluminium prices have been on a very bullish run since March 2024. It is up a staggering 20% since early March 2024 and 13% year-to-date. As a matter of fact, the entire metals sector has been performing well with the benchmark London Metal Exchange (LME) up 11%, since the beginning of 2024. 


WHAT IS DRIVING THE ALUMINIUM PRICE RALLY?



1) Social Unrest and Political Instability in Guinea

The ongoing social unrest in Guinea has been attributed to the rally in aluminium price since Guinea is one of the biggest producers of bauxite, a key element used in alumina refineries. The major aluminium price rally in 2021 was also linked to the political unrest in the country.


2) Geopolitical Tensions

Recent geopolitics have seen a rush for safe haven buying, especially in gold and silver. This has also put an underlying bid in the metals space including aluminium.


3) LME Ban on Russian Origin Metals

From April 13, 2024, both the London Metal Exchange (LME) and Chicago Board of Trade (CBOT) have banned the eligible delivery of aluminium, nickel and copper of Russian origin. Futures moved instantly on this news, with aluminium futures jumping over 2% on the news. Russia accounts for 5% of global aluminium production.


4) Strong Demand and Low Stockpiles

Expected interest rate cuts by the Federal Reserve is expected to further accelerate the recovery in global demand for aluminium. Strong demand in aluminium is coming from the solar and electric vehicle sectors. On the supply side, stockpiles remain tight at LME’s reserves, pegged at 549,000 tonnes towards end 2023.


THE CASE FOR PARAGON

I have shared before on Paragon as a stock to own before the recent rally in aluminium prices. To recap, Paragon has announced plans to move into the the recycling business, primarily focusing on aluminium recycling. The emergence of Mr Koon Hoi Chun (nephew of Tan Sri Paul Koon)  as the new controlling shareholder has created some excitement that this could be the next Press Metal and PMB Tech in the making.



Paragon is in a sideways consolidation mode since hitting an All Time High (ATH) price of RM4.05 on 26 Feb 2024. It is in a asymmetrical triangle pattern with the pivot point at RM3.70. This pivot point serves as immediate indicator on the next move of interest. 

Should the price move above the pivot point, a test of the ATH RM4.05 is on the cards, with the resumption of the uptrend wave expecting to test uncharted territory with Elliot wave projections targeting RM7.08 next. On the downside, strong support is seen at RM3.45, which has been holding firm since the price breakout in late February 2024.


PRESS METAL BHD



Press Metal is continuing its bullish momentum to the upside, reacting to the recent surge in aluminium prices. Currently up 13% year to date, it is one of the best performing heavyweight component stocks on Bursa Malaysia.


CONCLUSION

I foresee Paragon rallying on the coattails of continuing bullish aluminium prices. Although currently less well known than Press Metal Bhd, I believe there is a lot of potential in Paragon becoming a big future player in the aluminium space.



Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments

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1 person likes this. Showing 1 of 1 comments

speakup

already up from 2.60 to 3.70, now only tell ppl buy?

1 month ago

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