It is somewhat strange that until the autumn of 2012 – and with some 20 years of technical analysis experience behind me at that point, I shied away from the single penny stocks and darling bulletin board plays. Not least because of the veritable abuse and kicking any share blogger that dares to go against a usually bullish consensus receives!
However, in the past 18 months or so, it could be said perhaps that I have sold my soul to the “speculative devil” and will now chart anything! What is interesting as a result of looking at the minnows or, in less polite terms, the “spiv” stocks, is that in my of course very subjective opinion, the skills I have in this area have improved quite significantly!
Oscars style false modesty aside, and wishing to be as ‘umble as possible, it is understandable that if you look at illiquid speculative penny shares, even half competently, that it is very likely that your overall charting skills will be successfully stress tested. Obviously, now and again there will be the odd howler, courtesy of rights issues, profits warnings, bids and the like. But overall, it seems logical to suggest that if someone can perform well amongst the tiddlers, the likes of Barclays (BARC), BP (BP.) and the like should be a walk in the park!
Looking at the daily chart of present “hot money” favourite Phorm Corporation (PHRM) and which is now the subject of a new attack by our old friend Mr Winnifrith, to my mind there are a couple of key technical events of note here in the recent past.
The first is the way that the shares broke above the 200 day moving average – then at 10p on a sustained basis at the end of October, and that since then, the top of the March gap at 15p has largely been the top for the stock apart from a brief November spike. In the wake of the latest March retreat from 15p, helped along no doubt with the controversy surrounding EK’s holding and TW’s assertion, traders have a couple of alternatives as far as the bull strategy is concerned. The first is to wait to go long on a weekly close above 15p – despite the bull trap risk. The alternative is to go for a bottom fishing strategy at the floor of a rising August price channel at 10p. Indeed, only back below the 200 day moving average – now at 8.2p would really knock out the buy argument here for the near term. The upside while 10p holds is seen as being a close retest of the November intraday peak of 19.91p over the next 1-2 months as a best case scenario.
Empyrean Energy (EME) is not only a bullish charting situation for a much followed minnow, it is also showcases one of the more bullish chart pattern setups. This comes in the form of an extended bull flag which has been in place since the end of December. But what is so interesting here to me is that rather than the consolidation occurring in a sideways pattern, we have actually seen the shares squeeze higher in recent months.
The view now is that we are entitled to regard the initial March break of February resistance at 13.5p as significant, and that the upside scenario is very much in place while there is no end of day close back below this level. The target on a 4-6 week timeframe is currently seen as being as high as the wide June price channel top at 20p as soon as the end of this month. The positive momentum in the price window should be backed by the extended June uptrend line in the RSI window.
Finally, we have Tower Resources (TRP) in focus since the break of the 200 day moving average now at 2.43p in October, and the higher support points above the 200 day line ever since. It helps that for much of the recent past, the blue 50 day moving average – now at 4.28p has supported the shares. But it should really be the case that the former December 5.22p intraday peak now comes in as new support in the wake of this month’s break to new higher territory. Indeed, on a 3 – 4 month timeframe we are looking towards the October price channel top of 12p once new support is made above the old December resistance.