Has Deterra Royalties Limited’s (ASX: DRR) Share Price Bottomed Out?

Summary

  • DRR (ASX: DRR) has delivered an impressive gain of ~16.62% in the past one month.
  • DRR’s prices have traded in a downward trend for more than 5 months with the lower tops and lower bottoms while correcting ~28 percent from December 2020 high to the recent low.
  • DRR’s prices recovered from the lower levels after forming a Bullish Harami (bullish reversal) candlestick pattern with the higher volume.
  • The stock is trading in a falling channel pattern for the past six months. 

Deterra Royalties Limited (ASX: DRR), that got demerged from Iluka Resources Limited (ASX:ILU) in November 2020 has seen its share gain  ~16.62% in the past one month from the low of AUD 3.85 tested on March 22, 2021. The company holds royalty over iron ore extracted from Mining Area C (MAC) which is operated by BHP Group Limited (ASX:BHP)

Read: ASX All-Ordinaries Index hits a New All-Time High, Will It Continue to Shine?

How is Deterra Royalties Limited looking on the charts

DRR’s prices traded in a downward trend for more than 5 months with the lower tops and lower bottoms formation and prices corrected ~28 percent from December 2020 high to April 2021 low. However, the prices recovered from the lower levels after forming a Bullish Harami (bullish reversal) candlestick pattern with the higher volumes and post that it delivered a decent gain of ~16.62% in just one month. The stock is trading in a falling channel pattern for the past six months. Although the prices broke the upper band of the pattern in recently the bulls were unable to provide a decisive closing above the breakout level, creating uncertainty over the short-term trend. Notably, a decisive breakout above the upper band of the falling channel pattern indicates the possibility of an upside trend reversal.

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group

Currently, prices are trading around the 7 weeks high level and the next important resistance levels for the stock is at AUD 4.99 followed by AUD 5.35, where the lifetime high rests. On the lower side, an important support level for the stock is at AUD 4.05 where 50-period SMA rests, followed by AUD 3.85, near the lifetime low. The summary of resistance and support are as below:

Technical Indicator Analysis (On the weekly chart):

The momentum oscillator RSI (14-period) is trading at ~65 levels, indicating a positive trend for the stock. RSI (14-period) recovered from an oversold zone and posted sharp upside movement. Prices are continuously taking support of the trend-following indicator 21-period SMA and currently trading above another trend-following indicator 50-period SMA. Parabolic SAR is also sustaining below CMP and appears supportive of the stock prices.

The summary of technical indicators:

After analyzing the current price action coupled with the technical indicator, Deterra Royalties Limited appears be at the cusp of a recovery from the downward trend; however, lack of decisive closing above the falling channel pattern breakout is putting uncertainties over the trend.

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