Although there has been no net change in its price since we last looked at it on the 11th of this month, Defense Metals Corp.'s (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) technical condition has strengthened greatly with it having broken out above nearby resistance, broken out above its downtrend and broken above its falling 50-day moving average as we can see on its latest 8-month chart below and most importantly this happened on persistent heavy volume.
This is believed to be due to the market starting to wake up to the positive implications for the company of the news that China is to ban the export of certain critical Rare Earths since Defense Metals' Rare Earth assets are in North America.
So, although the price hasn't moved much — yet — the heavy volume driving this advance and the soaring Accumulation line resulting from this is very bullish.
We can see what has been going on in the recent past much more clearly on the 3-month chart. At first glance, the recent base pattern that the price just broke out from could be classified as either a Cup & Handle base, a Double Bottom, or a Head-and-Shoulders, but the deciding factor is the persistent heavy volume driving the advance out of the right side of the pattern, which is a characteristic of a genuine Cup & Handle base so that's what we'll classify it as.
This is very helpful because it explains why the price is now running off sideways /down — it wants to make a Handle to complement the Cup and complete the Cup & Handle base pattern.
However, volume has dipped dramatically as the price has eased back a bit today. This is very bullish and suggests that we won't see much of a Handle before the price takes off higher again on another upleg, and it could even be done consolidating now.
With its technical condition having strengthened considerably since we last looked at it and downside looking very limited while upside is big, we stay long, and Defence Metals is rated an Immediate Buy here.
Defense Metals' website.
Defense Metals Corp. closed trading at CA$0.235, $0.177 at 12.03 pm EDT on July 19, 2023.
Originally published on clivemaund.com on July 19, 2023, at 12:05 pm EDT.
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CliveMaund.com Disclosures
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.
