On September 27, Confederation Minerals Ltd. (TSX-Symbol: CFM; Market-Cap: $18 million) announced to launch – via Magna Resources Ltd. (CNSX: MNA; Market-Cap: $4.4 million) – a new IPO company that will hold the assets of the private firm American Potash LLC (especially the 3,242 ha sized potash- and lithium project „Green River“ that is located within the petroleum- and salt-rich Paradox Basin in the south-east of Utah (USA).

 

Magna is doing a 2:1 stock-split, whereafter it will trade with twice as many shares  (22.42 million shares issued & outstanding), whereas Confederation already confirmed to purchase 6.67 million newly issued Magna shares for a price of $0.30/share respectively $2 million. Thereafter, all the 29.09 million Magna shares will be transferred to Confederation resulting in an effective interest in American Potash of around 56%.

 

The CFM management decided that these shares will be assigned to a newly listed company whose shares will be distributed to all existing shareholders of CFM (so-called “Spin-Out”). We expect the IPO of the new potash stock already in the next few months – thus, we anticipate that new investors buy CFM-shares in order to be able to get an interest in the new company for “free”.

 

As per the left chart since 2011, the price just landed on the lowest (grey-dashed) horizontal support at the $0.40 level. Since the market capitalization was cut in half during the last month, we expect a new upward-trend commencing from the current support level.

 

At the bottom of the chart is the price development of CFM relatively to the HUI index, whereas the strong correction (meaning that the HUI performed better than CFM) of the last weeks just landed on the green support – from which level a rebound to at least the red parallel-resistance is anticipated (meaning that CFM will now perform better than the HUI again).

 

The MACD indicator generated a sell-signal in early August (because the black curve began to trade below the red curve) that is still active. A buy-signal is issued as soon as the black curve crosses the red curve again).


 

 

The longer-termed perspective since mid-2008 shows that after the strong upward-trend from $0.08 to $1.40 within 6 months (September 2010 until April 2011) a not-unusual sideways-consolidation phase commenced that just corrected to the black-blue intersection-support at $0.40. In case of a breaching of this support, a sell-signal is generated that will stay active until the black parallel-support at $0.30 – thus, a buy-signal predominates at the very moment. The RSI indicator at the top of the chart just landed at the red-blue-green triangle-apex at 30 points – thus, a thrust (to the up- or downside) is around the corner.

 

Relatively to the HUI index, the grey horizontal support at 0.001 was breached recently which action generated a sell-signal (meaning that the HUI is to be favorized against CFM). A buy-signal for CFM (relative to the HUI) is issued as soon as the red resistance at approx. 0.0011 has been broken as thereafter we expect a strong and fast thrust to the upside having the goal to at least double.

 

The MACD just dropped to a level that reminds on the low of May 2011 – thus, we anticipate a rebound shortly.

 

The PPO just corrected to the blue support generating a buy-signal that will be enforced heavily once rising above the red and green resistances as thereafter we expect a strong upward-trend à la thrust to the upside. A sell-signal à la thrust to the downside is issued not until breaching the blue triangle-leg.

 

The ROC also just corrected to a blue support, whereas a typical explosive thrust to the upside is anticipated once rising above the red triangle-leg. A sell-signal à la thrust to the downside is issued as soon as the blue triangle-leg has been breached.