Zak Mir on AIM volume leaders GKP, GKO & AMERISUR and the Wild West!

I make no secret of my view (and in something of a contrast to other blog sites and fellow writers here) that AIM stocks represent the most interesting area of the London stock market. Of course there is always the ever present “excitement” of corporate governance “mines” that gives rise to the opinion that investors are quite frankly operating in the Wild West. Nevertheless, whatever the ins and outs of the fundamental side of some of the big names here, from a charting perspective there is always plenty to chew on and, if you get it right, significant rewards…

I start off today with THE AIM stock, one which is always on the top of the bulletin boards and normally attracting controversy of one kind or the other. Yes, the perennial punters favourite – Gulf Keystone. What we see at the moment on the daily chart of Gulf Keystone (GKP) is an unfilled gap to the upside through the 200 day moving average, and which itself is currently falling at £1.70.

Indeed, the reason for the coverage here today is that this is a significant technical signal, one of the most important in the Technical Analysts book. The only slight quibble that one would have about the integrity of the signal is the way that in recent days we have seen the share price of Gulf Keystone gyrate quite wildly either side of the 200 day line. This is quite typical ahead of a breakout move, but it does warn us that the latest jump to the upside may not be the final sustained direction for the shares over the next few weeks, ie there may be another toe back below the 200 day moving average.

Nevertheless, at least while there is no end of day close back below the floor of the overnight gap at £1.67 there will be very little reason for bulls of this stock not to assume a minimum retest of the October intraday resistance at £1.86 over the next couple weeks. The stop loss on the best of the recovery here would be an end of day close back below the floor of a rising trend channel from April at £1.60.

With Greenko (GKO), we also have another stock displaying an unfilled gap to the upside. Here it can be seen how today’s move follows a period of extended strength within a rising trend channel from May last year. What can also be seen as well is the way that since the beginning of November the shares have been in a V shaped Bull flag, typically one of the stronger continuation formations in charting. The view now is that at least while there is no end of day close back below the 10 day moving average at £1.48 one would be looking for significant further upside. The favoured destination at this point is the August 2012 price channel top target of £1.90, and which could be reached over the next 1 to 2 months.

Perhaps one of the worst things about trading in the aftermath of an extended move on a stock or index is the sticky issue of just when to get back on board a new leg of upside momentum. This conundrum has been illustrated in the recent past on the daily chart of Amerisur (AMER) where we seem to have an acceleration in trading volume to accompany the latest break through the 200 day moving average at 47p. The likelihood now is that while there is no end of day close back below the 200 day line we could be treated to a retest of 2013 resistance at 60p plus over the next 4 to 6 weeks.