Cobalt is the next big thing after lithium. It is used in the production of high-tech batteries and demand for it is ramping up. There are few producers of cobalt in the world and Scientific Metals is one of them, and its stock is looking set to do very well indeed.
The 6-month chart for Scientific Metals is initially a little off-putting, as we can see that it has about doubled from near its lows in December, but there are two points to note here; one is that these lows were at a very low level and the other is that this rally is little more than a blip on its long-term chart which we will come to shortly. Although short-term overbought, it is thought unlikely that it will tarry long here, especially given its positive volume pattern, very strong volume indicators and background of a rising 200-day moving average.
The long-term 9-year chart is most encouraging as we can see that Scientific Metals is still historically at a very low price, and we should definitely add it to our “bucket list” as it appears to be starting to break out from the second “bucket” of a pair of bucket bases. The sharp rise out of the 1st bucket shown would ordinarily have been expected to lead to a bullmarket after due consolidation, but it didn’t, and the price slumped back to mark out a second bucket, and the ensuing reaction back from last Spring means that this pattern could be described as a “bucket and Handle” or “Pan and Handle” base. A big difference between this bucket and the 1st one is that this one has been accompanied by much stronger upside volume that has driven volume indicators sharply higher, especially the Accum-Distrib line shown here, and On-balance Volume (not shown) is also at new highs. Right now the stock is believed to be starting a breakout drive from the Handle of the Bucket and Handle base and also from the entire base pattern that will see it vault above the resistance shown towards C$0.60 much faster than most expect.
Therefore the stock is regarded as an immediate buy regardless of its short-term overbought condition. The company’s stock trades in very light volumes on the US OTC market, but that should improve going forward.
Scientific Metals
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Scientific Metals Corp, STM.V, SCTFD on OTC, closed at C$0.35, $0.267 on 3rd February 17.
Posted at 8.25 am EST on 5th February 17.