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Once each week at BMR, our technical analyst highlights a junior resource stock (outside the BMR Portfolio) that shows very favorable chart patterns.  Investors/traders of course should perform their own due diligence, as always, and carefully review fundamental factors as well.  This weekly feature is merely meant to introduce some possible opportunities that readers may wish to investigate.  This morning, John takes a look at Bayfield Ventures Corp. (BYV, TSX-V) which has delivered some very interesting drill results recently from its property immediately adjacent to Rainy River’s (RR, TSX-V) gold deposit in northwestern Ontario:

This morning,  Technically Speaking examines Bayfield Ventures Corp. (BYV, TSX-V).  On Friday, BYV opened at $1.05, its low for the day, climbed as high as $1.19 and then closed at $1.17 for a gain of 13 cents (12.5%) on total CDNX volume of 1.2 million shares.

Looking at the 6-month daily chart, even at first glance we see an exciting situation. From May1 to August 1, BYV traded in a basing consolidation triangle or wedge with minimal daily volume of less than 100,000 shares. Then at the beginning of August we see a breakout above the blue resistance line at the 40 cent level. This was a clear indication the scenario with BYV had changed.

Between August 3 and September 1, BYV climbed as high as 60 cents and formed a small symmetrical triangle.  When that occurs in the middle of a run it’s known as a continuation triangle. This is because the probability is that the price will break out in the direction of the trend which in this case is up.  Then on September 1 it broke out of the triangle, up through the blue top resistance line on volume of 2.7 million shares – more than 2.5x that of the previous day.  Always monitor the volume closely.

Then in just 5 trading sessions the price climbed from 54 cents to a high of $1.38, creating a flagpole, before going into decline. On the 5th trading session the volume was in excess of 6 million shares. This was the exhaustion day.   From there the stock price formed a downsloping flag (downsloping blue and green lines) – if you have a flagpole, why not a flag? After a flagpole this is a very bullish pattern and is also a continuation pattern.

On the 17th trading session of the flag there was a breakout through the top blue resistance line with a 50% increase in volume from the previous day.   There is a resistance band shown (horizontal blue dotted lines).   This chart pattern set-up, sometimes known as a first leg up, is extremely bullish.

Looking at the indicators:

The RSI is pointing up and in neutral territory at 63% and has formed a very bullish and rather flat “W” formation.

The Slow Stochastics has the %K (black line) crossed up above the %D (red line) in a low position at 33% – very bullish.

The Chaikin Money Flow (CMF) indicator is at zero but this is bound to change to buying pressure as the uptrend continues.  

Outlook:  This stock is looking very bullish and it would not surprise me to see it make new highs this month.  Everything is set.  Chart patterns and indicators are very bullish.