The Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) Wicheeda project in British Columbia is set to supply about 10% of the world’s Rare Earth needs, and with their use in electric vehicles and increased demand for the defense (war) industry arising from the war in Europe, demand for Rare Earth elements is set to grow. The reason for recommending Defense Metals stock here is that it looks like it is at a great entry point for reasons that will become clear as we review its charts.
Starting with the long-term 54-month chart we see that after a large base pattern completed between early 2018 and late 2020, the price broke out and rocketed higher in a blowoff move before reversely sharply and dropping almost as fast back towards support at the top of the base pattern. Since the middle of last year a Double Bottom base pattern has formed in this zone of strong support which the price broke out of early last month before reacting back into the pattern.
On the 18-month chart we can see the fine Double Bottom in more detail and how the breakout early last month has been followed by a reaction back to the now rising 200-day moving average. The Accumulation line was trending higher throughout the development of the base pattern which portended an upside breakout.
On the 6-month chart we can see a variety of reasons that the stock is attractive here. Over the past several weeks the price has reacted all the way back to the rising trendline shown, with the volume becoming light, which indicates a high probability that it will turn higher again here. Given the brightening outlook for commodities generally and Rare Earths in particular and the string of positive drilling results out of the company in recent weeks, it is surprising that it has reacted back this much, and it is therefore suspected that there are capital markets reasons for this behind the scenes.
As Luisa Moreno, president and director of Defense Metals, stated in the latest update: "We are excited with the consistently high-grade results to date. Wicheeda is emerging as a world-class deposit, and we are fortunate to be part of the development of this project."
Other positive points to note on the chart are the convergence of the downtrend, which makes it a bullish Falling Wedge, the bullish alignment of the moving averages after they crossed about a month ago and lastly the MACD indicator which is starting to move into oversold after unwinding the heavily overbought condition that had developed by early - mid March with its histogram (bars) deep in negative territory and good for a rally.
Defense Metals is therefore rated a strong buy here for all timeframes.
Defense Metals website
Defense Metals Corp DEFN.V, DFMTF on OTC, trading at C$0.285, $0.23 at 12.45 pm EDT on 31st March 21.
Originally posted on CliveMaund.com at 12.50pm EDT on 31 March 21.
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 jurisdictio
