Ferrexpo is in a downtrend toward its lowest levels.

The rebound recorded in the last trading sessions is not justified by Ferrexpo’s fundamentals which are still fragile. Indeed, the profitability is unsteady: profit margin was at 15.1% in 2012 vs 31.8% in 2011. Further, the Thomson Reuters consensus has recently revised downward EPS estimates. It is often an indicator of the coming decline in profitability.

From a technical viewpoint, the security is in a bearish trend in the long and mid-term, even if prices have increased in the short term. The current technical rebound allows the stock to be close to its GBp 30.75 resistance but is not likely to continue. Indeed, moving averages in the long-term are still in a downtrend and the 50-week one may drive prices down towards GBp 163.4.

Therefore, fragile fundamentals and technical pattern let see a downside potential. Investors can take a short position close to the GBp 196.1 resistance area and aim a return in the GBp 175 area, corresponding to the 20-day moving average. A stop loss will be fixed around the GBp 205.5, corresponding to the 50-week moving average.