Providence Resources – are the charts right?

We have written about PVR.l twice now, where our perception of the massive disconnect between the underlying asset value and the share price is set out clearly in those blogs. For more indepth analysis, the company usefully provides research from a number of brokers.

We won’t regurgitate the valuation story again, but pick up on the commentary from the AGM this week in which frustrated shareholders put it to Providence’s Board that as the farm out process at their primary field – Barryroe was taking so long, just what were the prospects of this now being brought to a successful conclusion.

CEO Tony O’Reilly was quoted as saying “…Barryoe farmout process is now nearing completion” and additionally – ”...it is not reflected in the company’s share price”.

Well, they say the chart “never lies”. Take a look at below…

Without trying to usurp our dear and venerable Editor Mr Zak Mir, I would contend that it presently displays what is known as a classic falling wedge. These wedges that are of the “falling” variety are supposed to resolve themselves to the upside, particularly where there is supportive strong volume on the up move. That ladeez and gentlemen’s is what is evident here. Additionally, the RSI rising above 50 combined with the rising 17 day exponential moving average sprinkles further classic charting clues into the picture.

The 135p level is now the nut to crack and I also see what is known in the trade as a “cup and handle” formation in recent weeks – another bullish sign. It seems like the stock was being bought quite happily into as the day progressed today with blocks of 20’s and 50k’s going through – frequently a sign of those “in the know” getting in.

IF the wedge breaks next week and 135p is taken out, the chartist’s target is 200p+. With broker notes suggesting real value of £5-7+ it will be fascinating to see how this plays out in the weeks ahead…

CLEAR DISCLOSURE – EXPOSURE TO PROVIDENCE RESOURCES IS HELD WITHIN TITAN’S FUNDS AND PERSONALLY BY RICHARD JENNINGS.