Disclaimer

This post is an academic exercise, and does not pretend to be investment advice. The question it addresses is whether TA is helpful in choosing stocks and whether technical entry and exit signals are reliable guides to timing one’s investment? This post disregards Fundamental Analysis considerations.

Previous assessment

A previous post June 26, 2014, used a weekly chart of the price action of Austin Exploration incorporating multiple moving averages over a three-year period, to form a view as to whether a significant flow of oil in a Colorado well would lift the languishing share-price?

https://technicality.me/?p=4487

Chart 2 months ago  (I)

Large range day following an earlier double bottom.

The conclusion was that the share-price had bottomed-out, and that there was evidence of an emerging trend-reversal, with a bullish-engulfing candlestick pattern, and cross-over of the short-term averages.

Trading-range break-out (Daily candlestick chart over the past six months) (II)

Break-out from trading range

TA observations

• The early signal noted in the post of June 26, 2014 failed when trading fell back into the long-standing trading range.
• The trading range appearance had been suggestive of stock accumulation between 1.0 cents and 1.3 cents.
• On the 31 July 2014, the share-price gapped sharply higher over-night  from 1.1 cents, and in intra-trading penetrated resistance at 13 cents and reached a high of 16 cents, before easing back to close at 1.4 cents.
• With profit taking, support at 1.3 cents was tested before rallying again above 1.6 cents in the past week to a high of 2.4 cents.

The bigger picture, with a weekly chart displaying multiple moving averages over the past two and a half years.  (III)

Austin Exploration Strikes a Gusher

Observations

• In the past week the trading range has been between 1.7 cents and 2.4 cents or 41% from a striking impulsive move higher.
• The high at 2.4 cents precisely touches the 50% Fibonacci level.
• The short-term averages have completed their cross-overs and are steeply headed upwards.
• The medium-term averages have converged, are  crossing over, and heading upwards.
• This chart suggests support at 1.8 cents, and resistance at 3.1 cents.
• The RSI is in the overbought zone.

Conclusions

1. The momentum of the past week suggests that there may well be further share-price gains in the coming week despite the high RSI and the easing of the share-price to 2.3 cents at the close for the week.
2. The diverging moving average plots also suggests ongoing upwards momentum, for both traders and investors.
3. Despite this, the direction of movement this week can not be foretold. It is suggested that it should be monitored as the week unfolds.
4. The gap in Chart II at between 1.9 and 2.0 cents may well acts as a support level.
5. With further price appreciation above 2.4 cents, the targets to be looked for are at 2.7 cents (61.8% Fibonacci level) and 3.1 cents (the next resistance level).

Possible strategies

For traders with open positions:

• consider closing position if the 2.0 cent support gap is breached
• Stop/loss position set just below the 1.8 cent support line.

For traders wishing to open a long opposition:

• Either look for rebound from 1.8 cents support or breakout above 2.4 cents to enter.
• Set target at 3.1 cents.
• Stop/loss positions at either 1.7 cents or at 1.95 cents depending on level of entry.

For investors wishing to go long:

• Wait for confirmation of upwards trending
  • Enter with continuing divergence of medium-term averages, and penetration of the next resistance level at 2.8 cents (the 61.8% Fibonacci level)
• Stop loss level at 2.35 cents.
• Target price at 100% Fibonacci retracement level at 3.9 cents.

Categories: Chart Analyses, Technical Analysis, Trading opinion