By Zak Mir.
The nature of the game for smaller mining stocks is volatile, to say the least. We all have to get used to the wild swings in price action and this is true even with a prevailing trend in place.
Petropavlovsk (POG) is a perfect case in point:
During June and until mid-July the stock price halved, only nearly to double by the middle of August. Despite these summer shenanigans, the overall technical trend remained to the downside. This view was relatively easy to define based on April’s falling price channel of between 60p support and 100p resistance.
Now the bulls will be hoping for an extended bear trap rebound from below August’s intraday low of 72p. Aggressive traders may wish to go long now with a stop loss set at an end of day close below September’s low of 68p. More cautious traders will probably prefer to wait until other buy signals trigger, such as an end of day close below the 20MA at 77p or a 20MA break combined with the RSI swinging above 50 (currently at 42). In fact, on reflection, it might be wise to wait until decent momentum is showing, given the stock’s nasty habit of halving or doubling at the drop of a hat! If a base is successfully made then the upside could be substantial.
If you think POG has had a rocky ride, then Avocet Mining (AVM) has been on a right old rollercoaster over the last few months:
The highlight of the daily chart above is the ‘Cup & Handle’ rebound during July and August. This took the stock from 7p to over 25p at its peak. Since then it has retraced just over half the summer spike but, the shares remain above June and July resistance at the 13p level.
Ideally, what we would now like to see is no sustained price action below September’s intraday floor of 14p. As with POG, it might be best to wait for a momentum buy trigger before taking the plunge to the long side. The optimal event would be an end of day close above the 50MA at 15.85p. Until the price reaches this point it might be best to wait on the sidelines however.
In terms of upside, a retest of August resistance/the 200MA at 23.77p looks like a decent target. The timeframe for such a move is between 2 and 4 weeks after the 50MA break.
I complete my trio of golden nuggets with a look at the daily chart of Condor Gold (CNR):
Arguably CNR is the best of this bullish bunch!
The start of CNR’s recovery began with a bullish divergence in the RSI oscillator in the second half of April. Since then, we have seen an extended 6 month uptrend for this indicator with another successful rebound off the spring trend line last week.
As for the price action, there is a clear rising trend channel, whose floor runs through £1.21 and the 50MA. But this is not all.
The end of last month and the beginning of this month delivered a bear trap below former September support at £1.20 and the 200MA at £1.25. The chances are that as long as there is no close back below the 200MA, we should expect a sharp acceleration to the upside and a minimum retest of August resistance at £1.50. The best case scenario is that we could see CNR hitting the top of the July channel at £1.65 by the end of November.