'A fellow going by the name of Tim sent me an email today, wanting to ask some questions about Mantle Mining. Recently the regulator has been clamping down on bloggers and tweeters posting things about stocks, so I wasn’t too keen on answering any questions in private. His email did get me thinking though, so I thought I would put up a chart and go through some analysis.
On Monday morning of this week, I put up a post about Mantle Mining’s breakout rally that occurred last week. You can see from the above chart that the stock opened at a very strong premium of 10c, and then traded to a high of 10.5c, before getting sold down throughout the rest of the day.
A low of 8.6c was made (this is the important bit) and then there was a mild recovery, with the stock closing 9.1c. The huge gap on the open was not a good sign. Typically when a gap is left in a chart, it almost always gets filled. So Mantle Mining was destined to come back and trade at Friday’s closing price of 8.5c. The fact that 8.6c was the day’s low on Monday meant that it was highly likely that there would be more selling today.
And that’s exactly what happened! Mantle Mining hit a low of 8c before managing a slight recovery to close at 8.6c. This sort of selling after a spike is fairly typical. The primary cause is day traders being forced to close out their positions. Similarly, once a speeding ticket hits the market, there’s always a chance of a blow-off – as the insiders take their profits and the late buyers get stuck with a loss. This is why it’s always best to try to get onto a speculative stock before it moves.
So having made all of those observations, it’s also worth noting that we could still see one more selling. The above pattern could be the forming up a bullish - three days selling - candle stick pattern. This is a bullish continuation pattern where there is three days of selling. Traders take their profits and this period of selling is deemed to be a ‘rest period.’ Both of the past two candles as still trading above Friday’s close, so that suggests that the bullish momentum is still there.
Moving onto today’s candle in particular. There was a long lower wick left in today’s candle. Despite the candle being red, this also suggests a bullish tone as the sell off ran out of puff. Today’s candle is a bullish hammer candle. Combine this with the drop in trading volume and there’s a suggestion that the sellers have been cleaned out. The bullish hammer pattern needs to be confirmed by further buying tomorrow.
Charting and candles stick analysis are helpful, but they don’t get it right all the time. Keep that in mind as well as the fact that this is a speculative stock. In other words, don’t be a mug and pile on large amounts of money that you really can’t afford to lose. Mortgaging grandma’s house to trade speculative stocks isn’t the smart thing to do.
From my previous post we do know that some news is due on the Bachuus Marsh Brown Coal Project, so we’ll all have to wait and see how it all pans out.'
MNM Price at posting:
8.5¢ Sentiment: Buy Disclosure: Held
