If you are a speculator or trader who doesn't like to wait weeks or months for an investment to pay off and wants to see results within days or even hours, this one is for you.
Lithoquest Diamonds Inc. (LDI:TSX.V) blasted higher around the start of the month with a gap move on massive volume, due to news of a discovery, as we can see on its latest 6-month chart below, and after continuing higher for a few days to become extremely overbought short-term, the usual reaction set in, which brought it back towards what is now strong support in the C$0.44–C$0.47 zone. This reaction has the classic signature of a countertrend reaction in a fast moving market, as it has been accompanied by a rapid die back in volume and a convergence of the price oscillations into an increasingly tight range—in other words it is a fine example of a bull Flag or Pennant within a powerful uptrend, which means it should lead to another sharp upleg very soon. Another bullish indication on this 6-month chart is that both of its volume indicators have remained elevated as the correction has occurred.
The 3-month chart enables us to see what is going on in a little more detail, and gives us an opportunity to append the RSI and MACD indicators to the chart. The former has already almost completely neutralized and while the latter, the MACD, has a long way to go before it has, its histogram has already corrected all the way back to the zero line and in a fast moving situation like this, that is enough to create the conditions for another upleg.
This bull market in Lithoquest began with a large gap on massive volume, and the rule is that the bigger the gap and the higher the volume, the more bullish it is. It is most unusual for a move like that to lead to a "flash in the pan" advance—normally it leads to a bull market that lasts for many months and sometimes years. This is another big reason why it is likely to advance from here.
Lithoquest is rated an immediate strong speculative buy, and risk may be limited by placing a stop below the apex of the outer Pennant—outer because a breakdown from the inner one would not spoil the pattern, and we can see that there is strong support at and above C$0.50. Lithoquest trades in hopelessly light volumes on the U.S. OTC market where for this reason it should be avoided. There are 45.9 million shares in issue.
Many years ago the Diamond Marketing Board or whatever they called themselves did an excellent job of connecting diamonds with the proposal of marriage, so that young men intent on this would scrape together their usually meager funds to buy a diamond engagement ring, which women have always had a marked tendency to keep if things didn't turn out so well, and of course they may have been a driving force behind songs such as "Diamonds are a girl's best friend." There is just one problem with this video—the gender ratio is incorrect, instead of 10 men to 1 woman, it should be 10 women to 1 man.
Lithoquest Diamonds website.
Lithoquest Diamonds Inc., LDI.V, closed at C$0.59 on 20th April 18.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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Charts provided by the author.
CliveMaund.com Disclosure:
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 stock market 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.
