Royal Helium Ltd. (RHC:TSX.V; RHCCF:OTCQB) has been kept under observation in recent weeks as the pattern forming in it looks bullish. It was to have been written up on Friday, but the big drop in the broad stock market acted as a deterrent.
However, just this morning, it has come out with major news that it has signed a new supply agreement with a major space launch company. This ought to give the stock lift whatever the broad market does. It is not known why the company does not state in its news release who the “major space launch company” is, but we can be reasonably sure that it is not that guy in the movie who builds a spacecraft in his backyard, so the story is not thought to be a lot of hot air.
On the six-month chart, we can see that a potential base pattern has been forming in the stock since mid-May, and in the middle of this month, it ran at the resistance at the upper boundary of the suspected base on big volume, a positive sign, with a tight bull Flag forming since that has featured some big volume up days.
While the Accumulation line (not shown) still looks weak, the On-balance Volume line has been impressively strong this month, and momentum (MACD) has advanced into positive territory. In short, this setup portends an upside breakout, and it is thought likely that the positive news out of the company this morning ought to trigger it, whatever the broad market does.
The 11-year chart shows the entire history of the stock. On it, we see that it exploded out of a huge Double Bottom base in 2020 and took off like a rocket. After ascending vertically, it peaked in 2021 and then went into a corrective bear market.
The huge rise into 2021 is thought to have been due to over-enthusiasm about helium. However, with the news out this morning that the company has landed what sounds like a big contract, it is thought that this bear market is over, and the stock should now rally, perhaps steeply.
Royal Helium is therefore rated an Immediate Speculative Buy as soon after the open as possible.
Royal Helium's website.
Royal Helium Ltd. closed at CA$0.38, $0.294 on August 26, 2022.
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