Top Of The Charting Pops
I have to confess that for me it has always been a tough call between the joys of the stock market, and the joys of the pop charts. Indeed, I am still an avid fan of the Pick of the Pops rundown of hits from yesteryear on Radio 2 every Saturday. However, my day job and the music charts do kind of combine in terms of the most followed and most popular small caps on the London stock market at any one time.
It is also pleasing when one picks out a chart and a few days later the set up works and the company is in the top risers of the day or week. For this week's column I thought it might be useful not only to highlight the flavours of the moment in terms of the winning stocks are concerned, but also the ones which have the best charting set ups, patterns which can be useful to remember for anyone hoping to get on the back of a multi bagger situation.
Island Reversal At Magnolia Petroleum
In the case of Magnolia Petroleum (LON:MAGP) we have a stock which had previously been beaten up quite painfully over many months, but which finally looks to be back on a more stable tack. This is said in the wake of the August gap to the downside, and the latest gap higher. Taken together, and so many months apart we have a classic Island Reversal formation – one of the strongest in the charting textbooks. The fact that the latest gap higher has been delivered through the 200 day moving average now at 0.11p makes the move all the more significant. This is because the 200-day line is regarded as the boundary between regarding a stock or market as bullish or bearish. A decent weekly close above this feature this week/next week, would confirm Magnolia's recovery credentials. The ideal scenario now is that the shares would complete the U shaped reversal which has been developing over recent months, with the top of the formation and the target back up to 0.2p plus. The time frame could be as soon as the next 1-2 months. At this stage only back below the recent gap support at 0.10p would really question the recovery scenario.
Saucer Reversal At ECR Minerals
One of the better rules as far as successfully charting stocks is that the longer the formation has taken to develop, the more reliable one would assume it to be, and the great the potential move. In the case of ECR Minerals (LON:ECR) it can be seen that the so called Saucer pattern on the daily chart has been brewing for as long as the last six months. The big breakthrough for the bulls though, came as recently as January with the recovery of the 50 day moving average now up to 1.28p, but then well below 1p. What is most helpful for this month is actually the way we have cleared the 200 day moving average at 1.4p so easily. I would not say that it has been cleared like a “blowtorch through butter” but this quote from “Goldfinger” is not far off. It is also useful to note that when the 200 day line is cleared at the first attempt, as has so far been achieved here, we normally see very strong follow through. In fact, the view here is that while there is no end of day close back below the 200 day line we could see a 1-2 months target as high as 4p initially – former initial 2016 support.