A sub-penny share which conforms to logic

Frontera Resources (LSE:FRR)

We’ve received rather a few emails regarding this lot and, worse, noticed it’s repeatedly one of the top chat topics in discussion groups on the internet.

Our preference is to ignore sub-1p shares, due to price movements often appearing driven irrationally and, also, we’ve a horror of being blamed ourselves as promoting any movement. Our ‘thing’ is to lay the groundwork where movement is liable to follow some sort of logic.

Rather neatly, in the case of Frontera (FRR), the share price actually has conformed to our usual logic recently!

On the chart below, the blue line represents a trend that commenced following the share’s last major opening second manipulation (circled) in early 2015.

Unsurprisingly, share price shuffles on 19 September managed to rather precisely bonk (again) on this trend line. It tends to suggest rather firmly we dare not take a rise seriously until such time the share price actually closes above that blue line, roughly 3.65p at present.

Alternatively, if we attribute movement this week as conforming to “the rules”, it appears anything near-term bettering 0.39p should prove capable of challenging an initial 0.45p, visually matching March’s highs and doubtless provoking a stutter in any rising cycle.

Of more interest shall be closure above 0.45p as we’d expect an initial 0.57p with secondary, if (when) bettered, at 0.83p when we need again to run the numbers.

Finally, this is not a share we cover from a day-to-day perspective, due to the unpleasant prospect which appeared at the start of 2016 when the share price moved into a region where our ultimate drop target calculated at minus 0.38p, obviously impossible.

Generally, when this sort of thing occurs, a share risks becoming a market plaything in the absence of any miracles. If we find ourselves re-running the numbers above 0.8p in the future, we shall cheerfully deem it a miracle.

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.