A Technical Appraisal of Novo Resources...

originally published Monday, July 08, 2019

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Back last October we figured that the drop in Novo Resources had been overdone and that it was a buy again,. While this assessment was correct in valuation terms, the timing was out for buying it, because it then decided that it was going to mark out a base pattern for the next 9 months, which was of course partly due to the sector remaining moribund until a month or so ago. That is all changing now with gold breaking higher, and as we will see, this is probably the last chance to buy Novo before it takes off higher again.

We will start by looking at the long-term 7-year chart for Novo which shows how, after basing for years, it took off like a rocket in the middle of 2017 on a major discovery in the Pilbara in Australia, which not unnaturally had investors and speculators wild-eyed with excitement resulting in the stock being quickly driven up to giddying heights. Then, again as usual, reality and second thoughts crept in and speculators stormed the exits to book their huge profits before they evaporated. This reversal of sentiment put the stock back on the defensive and it has remained in bearmarket since it 2017 spike high.

The 3-year chart enables us to examine the action from the 2017 peak in detail, the better to determine where it is at in its cycle and what is going to happen next. As we can see, the bearmarket phase has taken the form of a classic 3-wave A-B-C major correction that now appears to have run its course, with the fine Double Bottom now completing strongly suggesting that a new bullmarket is incubating, and we have 2 big important factors suggesting that it is imminent. One is the gold’s recent and ongoing breakout into a major new bullmarket, which of course will act as a powerful driver for any gold stock that “has the goods”. The 2nd important factor is that the price is on the point of breaking out above the important long-term downtrend line shown on the chart, and when this happens, we are likely to see dramatic upside acceleration.

It is thus nice to know that the price is still very close to the lows of the recent bearmarket / major correction, a situation which is not expected to persist for much longer. On the 6-month chart we can see just how close and also the very bullish action of recent weeks in detail, that so far has not led to much of a gain in the price. Observe how the price broke higher last month in a satisfactory manner in response to strength across the sector, but then ran into trouble at its falling 200-day moving average which sent it back in the other direction, which is normal – the muted gains in Novo thus far are due to the still unfavorable alignment of its moving averages which are in bearish alignment and still downsloping, but this is changing fast. We are seeing bunching of the price and its moving averages with the 200-day having closed the gap with the price, which is creating a potent setup that could soon lead to a big move to the upside, especially given how close it is to breaking out of the downtrend that we observed on the 3-year chart. It is thus interesting to observe to observe that the minor reaction of the past couple of weeks has brought it back to support near to the 2nd low of the Double Bottom, and that on Friday a quite pronounced bull hammer appeared, suggesting that it is on the point of turning up again.

The conclusion is that Novo Resources is probably at an optimum entry point here. So we stay long and it is rated an immediate strong buy.

Novo Resources website

Novo Resources Corp, NVO.V, NSRPF on OTC, closed C$2.19, $1.64 on 5th July 18.

Posted at 9.30 am EDT on 8th July 19.

The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.