We got enthusiastic about Nexus Gold Corp. (NXS:TXS.V; NXXGF:OTCQB) earlier in the year, but we were too early and it proceeded to drop back near to its lows of last December. The error with this is easy to see in hindsight. Looking at the latest one-year chart, we can see that early this year its moving averages were still in unfavorable alignment, because the 50-day was quite some way below a still steeply falling 200-day, implying that more time would probably be needed before a sustainable advance could gain traction.
So, having committed the error, there was little we could do but wait and watch. The reason for this update now is to point out that the technical condition of the stock has improved substantially as the year has unfolded, and happily it is still at a very favorable point for new buyers or anyone wanting to add to positions.
So, what has happened? Well, after dropping back near to its lows of last December, it is now clear that a low-level head-and-shoulders (H&S) bottom has formed in recent months, and the duration of this base pattern that started to develop in May has allowed time for the moving averages to swing into much better alignment.
As we can see on the one-year chart, the 200-day moving average has now closed up the gap with the 50-day and the price, and is now flattening out. We have a potent bunching of the price and its much more favorably aligned moving averages that could lead to an upside breakout soon, which is made more likely by the quite strongly bullish volume pattern. The "cherry on the cake" here is that the price is still very low to the right shoulder low of the H&S bottom, meaning that we have a great entry point, especially as, from this point, it could take off higher quickly.
We'll now put recent action into context by looking at a chart going back 42 months. This chart shows a near catastrophic loss in value from the high attained as recently as early 2017, when it got to over CA$3.60/share, with the stock losing about 97.8% of its value since then. What this means is that it is now very cheap, which is great news, provided that better times are on the way.
Fortunately they do seem to be, for the company is successfully raising money to start maiden drilling in November on its highly prospective Dakouli 2 gold project in Burkina Faso, West Africa, which has already shown high-grade samples and abundant visible gold. Results are expected at the end of January.
In addition to this, there could be joint venture (JV) news at any time as the company is in discussion with potential JV partners. For good measure, all this is going on against the background of a major emerging new bull market in gold. So the outlook is very promising indeed, but don't tell anyone—at least until you've bought any stock you want.
While it is of limited technical use, the long-term, 11-year chart does show why Nexus is basing in this area, for the severe bear market from the early 2017 peak bottomed very close to the red trend-line shown running across a series of lows from the late 2014 bottom. On this chart it certainly looks like the only way is up, as the stock is now very close to being worthless.
Finally, we will take a quick look at the six-month chart, which shows recent action in detail. Most of the key points were covered when we looked at the one-year chart, so we don't need to dwell on it for long. There are several addition points to mote on this chart. The first is that the price appears to be very close to what should turn out to be the right shoulder low of the head-and-shoulders bottom. Secondly, the dip of the past six to seven weeks has taken the stock from being overbought to rather oversold. Lastly, the accumulation line has held up well on this decline, a positive sign that increases the chances of a reversal very soon to the upside.
The conclusion to all this is that Nexus Gold is viewed as a highly attractive speculative play here, with potential for big percentage gains from the current low price, and it now has the advantage that its technical condition is considerably improved from when we first looked at it early in the year, thus increasing the chances of its performing well from here.
Nexus trades in generally light but reasonable volumes on the U.S. OTC market, where buyers should, as ever, be sure to use limit orders.
Nexus Gold website.
Nexus Gold Corp. closed at CA$0.08; $0.058 on 4 October 2019.
Originally posted on CliveMaund.com at 8.15 a.m. EDT on 7 October 2019.
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.
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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.
