6:30 am Pacific
Richfield Ventures (RVC, TSX-V), which was first introduced to BMR readers last December at $1.20, has been enjoying tremendous success in developing its Blackwater bulk tonnage Gold project in central British Columbia. Richfield has a fully winterized camp in place for continued aggressive drilling of Blackwater in the months ahead. The company, which is armed with nearly $20 million in cash after a large financing last month, has delievered some excellent drill results and the stock has tripled in value since early July when the CDNX bottomed out at 1343. In a news release yesterday, Richfield announced it has acquired additional claims immediately to the west of Blackwater and that more drill results are expected sometime next week. The stock has been consolidating recently, forming what John states below is a “continuation pennant”, in advance of what appears to be another potential breakout:
John: Yesterday Richfield traded in a narrow range, opening at $2.75, reaching a high of $2.78, a low of $2.74, before closing at $2.76 for a gain of 1 penny on rather low CDNX volume of 36,000 shares.
Looking at the 2-month daily chart we see that on August 25 the stock price broke out above the previous consolidation resistance level (blue horizontal line) on 2x the volume of each of the previous 8 sessions to a high of $1.74. This was followed the next day by another rise in price to a high of $1.98 on relatively huge volume for RVC of 588,000 shares. These two moves set up the upsloping channel which continued to form until September 16 when there was a breakout above the resistance (blue line) of the channel.
When looking for chart formations always be aware that chart patterns occur within chart patterns. In this case we see that a continuation pennant was formed inside the upsloping channel between September 7 and September 15 when the price broke above the top blue line of the pennant. From September 16 to September 27 the price pattern was a downsloping channel, then from September 28 through now the candles have formed a continuation pennant near the top of the downsloping channel. This often occurs just prior to a breakout.
Since the beginning of September the average daily volume has declined, validating this period as one of consolidation. I have also shown the Bollinger Bands with the SMA (20) pointing up and shown as a red dotted line. Note that the price bounced off this moving average on August 16 and August 25, and again on October 7, 8 and 12 (yesterday). The prices have moved continuously in the top half of the upsloping Bollinger Bands which is very bullish. Also note that the Bollinger Bands are converging which indicates there could be increased volatility in the near future.
Looking at the indicators:
The RSI has been virtually flat around the 60% neutral level since September 27. This can be viewed as “bullish neutral” being above the 50% level.
The ADX trend indicator has the +DI (green line) above the -DI (red line) at 23 and 19, respectively, and flat with the ADX trend strength indicator (black line) gently sloping down at 27. These indicators are in bullish orientation but relatively flat due to the consolidation.
The Bollinger Band width indicator shows the distance between the band is very low and close to the previous low level (orange horizontal line). This previous low occurred on August 25 when the price broke above the consolidation resistance.
Outlook: Richfield’s chart patterns and indicators point to a probable breakout to the upside in the near future.
