Apart from being a good way of ensuring that I do not spend too much time at the local disco late on a Friday night, the Zak Was The Week That Was article is very much a personal battle to ensure that the standout situation recommendation chosen will not come to slap me in the face by the time the next week’s report is written!
On this theme, one of the contenders which just could not wait to get into the weekly report is African Barrick Gold (ABG), a stock which has been in something of a nightmare scenario over the past 18 months. However, some technical traders may now be looking to crack open the champagne given the way that Friday August 9th was the first day since January that this stock closed above its 50 day moving average. Indeed, given the 128p close versus the 115p position of the actual 50 day sma line, we are looking at quite an achievement. Even more helpful is that despite the sharp end of week gain, the RSI level is 63, still 7 points off being overbought. The expectation now is that there is still enough momentum here for African Barrick to make a retest of the former June 149.7p intraday bull trap peak, perhaps as soon as the next 2-4 weeks. At this stage, only a close back below the 50 day moving average on an 3 end of day close basis’ would be outright negative.
Until the autumn of last year, I made a point of never taking an interest in either AIM stocks, or indeed any stocks of the single figure penny share variety. I would also shy away from those companies which attracted the interest of the bulletin boards. But, for some reason, possibly related to spicing up my interest in the equity market, these days I am always on the hunt for the next multi-bagger prospect / today’s most followed stocks. Quite a volte face!
A good example of the genre is Noricum Gold (NMG) where the shares first came to my attention around the 0.5p mark in May. At that point, the stock was still within a relentless bear run. But, bullish RSI divergence and a break above the 50 period moving average (then below 0.5p), suggested that recovery could be possible. Extra interest over the recent past has come in the form of July’s bull flag either side of the 200 day moving average at 0.69p and the way that we have seen a spike through the top of the flag at 0.8p to start August. This would appear to offer a reasonable risk / reward set up in the sense that while there is no end of day close back below the former July peak we could be looking at 2012 resistance line projection target as high as 1.4p over the next 4 to 6 weeks.
The technical recovery also taking place at ECR Minerals (ECR) has not being that different from the one seen at Noricum Gold described above in the sense that bullish divergence in the RSI window between the April and July support – either side of the 0.1p level – did correctly flag the recovery we have seen since the beginning of August. Indeed, although there have been false dawn recoveries for this stock ever since the summer 2012 peaks of over 0.8p, the difference between now and much of the past year is the way that intraday support has been coming in at, and above, the 50 day moving average – currently at 0.1p. The view now is that while there is no weekly close back below this feature that we should at least be treated to a 200 day moving average retest at 0.2p. Ideally, by the end of the year, a journey towards the top of last year’s falling trend channel at 0.5p plus is on the cards too. Clearly, this is not the type of situation for everyone although the charting principles here do appear to be well embedded.
Starting this weekend, I am producing a new feature – Zak’s Research “Bites” and which take the form of both a fundamental and technical analysis overview, together with recent newsflow on various popular stocks. Click the image below for your free copies in which I start with Petropavlovsk, Xcite Energy, Lloyds Banking Group, Rockhopper Petroleum, Gulf Keystone Petroleum.