Seafield Resources (SFF, TSX-V) is finally starting to wake up and bounce back after a 6-month slump. We’ve stated consistently over the past few months that improving fundamentals will eventually drive this stock higher – the company has an outstanding land package in the Quinchia District of Colombia and Seafield’s drilling is expected to add significantly to its current 43-101 inferred resource of nearly 800,000 ounces (Miraflores) and a non-compliant in-house estimate of another 800,000 ounces (Dos Quebradas). Chuscal is the company’s third major target at Quinchia – it’s at a less advanced stage but equal to the other two in terms of its potential. Tonight, John takes a detailed look at Seafield’s improving technical condition:
John: On Friday, Seafield opened at 20 cents, its high for the day, then traded at a daily low of 19 cents before closing at 19.5 cents for a loss of half a cent on total CDNX volume of 207,000 shares. This was after starting the week at 16 cents and rising to a weekly high of 22 cents on Thursday.
Looking at the 6-month daily chart we see that on May 13, Seafield was trading at 22 cents, then it declined to 16 cents and traded sideways until it climbed during the last week of June to reach a high of 23 cents. This trading pattern was Cup #1 (maroon). Then it started to decline again to form a handle to complete the “cup with handle” pattern but the handle failed because it retraced down to 15.5 cents and again traded sideways until August 30 when it started to climb again, reaching 22 cents September 2 to form Cup #2 (green). The handle started to form with Friday’s trading.
The total trading pattern from early April to last Friday can be described as Cup #3 (pink) with only part of the right side of the cup formed. A breakout above 22 cents would be very bullish and could push the price to the 30 cent level to complete the cup. The estimated rise above the cup after a breakout is the depth of the cup added on to the top of the cup which is 6 cents + 22 cents = 28 cents. This forms a resistance band between 28 cents and 30 cents. At that point it’s expected a handle would start to form on Cup #3. From the trading patterns to date, this is a probable scenario.
Looking at the indicators:
The RSI has turned down below the overbought region. This move is expected if a handle is to form. The volume required to move the stock from 16 cents to 22 cents last week was far less than that on June 28 and May 13, indicating that most of the loose stock at this level has been accumulated. – bullish.
The Slow Stochastics has the %K (black line) crossed down over the %D (red line) indicating the possible formation of the handle in the near future.
The Chaikin Money Flow (CMF) indicator shows a definite increase in buying pressure on Monday, Tuesday and Wednesday of last week. It slacked off for Thursday and Friday, but bullish nonetheless.
Outlook: I expect in the near future Seafield will finally overcome resistance at 22 cents and take a run at the next resistance area around 30 cents. The stock is a lot tighter now and drill results are expected sometime this month.
