Technical analyst Clive Maund discusses why he
believes the stock of a small oil and gas company actively exploring in West
Texas is at a "near perfect entry point."
It's been a long wait for many investors in Torchlight
Energy Resources Inc. (TRCH:NASDAQ), but it looks like the wait will soon
prove to have been worth it, as the prospects for the company and the stock
now look better than ever. While we are going to concentrate on the technical
picture for the stock, as usual, you can read about the improving fundamental
situation for the company in "Energy Firm's Early Test Well Results 'Very Positive'"
and also in "Torchlight Illuminate a New Texas Oil Basin" and in
"Why Four Wall Street Experts Are Recommending This Oil Stock."
Not surprisingly, this plethora of upbeat articles on the company right after
the positive drill results helped drive a spike in the stock, so we figured
that it would react back to a better price once the excitement died down a
bit, and that is just what it has done, and it is considered to be at a near
perfect entry point here.
On the latest 6-month chart we can see how the positive drill results and
ensuing publicity drove the stock sharply higher on big volume, which was
bullish. The sudden spike in the price inevitably brought out selling by some
jaded long-time holders of the stock causing it to react back just as we
expected, but now it has stabilized at support at $1.12 and a little above,
and is believed to be ready to turn higher again—and on the next advance
there will be less overhanging supply to contend with so it should get
further, and take out the resistance level shown. Now we will proceed to
examine the longer-term 4-year chart on which we will quickly see that a MUCH
bigger move is in prospect for Torchlight that will make last week's spike
higher look like a minuscule blip, which is actually all it was in the larger
scheme of things.
On the 4-year chart we see that the time is nigh for a really big move in
Torchlight, which has been languishing in a huge Triangle since mid-2015, or
for 3 years now. With this Triangle now rapidly closing up, it is clear that
this move is imminent, and with things going so well for the company the
likelihood is that the breakout will be to the upside, and it may be helped
by another upleg in oil. After a buildup like this we can expect to see a big
runup in the event of an upside breakout from the Triangle and the resistance
shown near to the top of it. Note the persistent strength of the volume
indicators, which is another strong bullish indication. After the dip of
recent days we may be at an optimum entry point here, on what may well turn
out to be the last dip before a major advance.
On the long-term 9-year chart, which shows the entire history of the
stock, we can see that, in addition to being a Symmetrical Triangle, the base
pattern also has the form of a giant Cup & Handle base that looks mature,
with the Handle of the pattern looking proportionate to the Cup and like it
is complete.
Conclusion: Torchlight is believed to be at an optimum entry point here
after its dip of recent days as it is in position to start a major bull market
advance, and is therefore rated a strong buy, and anyone holding should of
course stay long.
Torchlight Energy website
Torchlight Energy Resources Inc, TRCH on NASDAQ CM, closed at $1.16 on 2nd
August 2018.
[NLINSERT]
