BullMarketRun.ca

John: The extent of the weakness in Seafield Resources (SFF, TSX-V) has surprised many, so this morning we take a look at the SFF chart to see if a bottom could be near at hand.  As of 7:00 am Pacific, Seafield is down a penny-and-a-half to 39 cents.  It has fallen in half from its all-time high of 77 cents in early December after initial drill results were released from its Miraflores Property in Colombia.  Nine more holes from Miraflores are pending in addition to initial results from the nearby Dos Quebradas Property which we believe is an even better target.

Yesterday, Seafield opened at 41 cents, its high, dropped to a low of 37.5 cents (its 100-day SMA) before recovering to close unchanged at 41 cents on volume of 1.4 million shares.

Looking at the 5-month daily chart, we see that on December 3 SFF gapped up at the open from the previous close of 23 cents to 35 cents and continued to climb during the day to a high of 77 cents.   A gap up in an uptrend is known as a “Rising Window”. From that day the stock has gradually retraced to yesterday’s low of 37.5 cents.   The Fibonacci set (blue) shows yesterday’s close is exactly at the 38.2% level which has provided support.

We see that early in January a “Morning Doji Star” was formed – this is a 3-candle bullish reversal pattern and for 3 sessions the stock price climbed. Then the share price continued its retracement until yesterday when we see the candle is a Doji. The preceeding candle was red so if today’s candle is long and white, that negates most of the red candle which would give us another bullish “Morning Doji Star” pattern. This is noted on the chart with a “?”.  The gap or space of the “Rising Window” is a band of support so with the additional support of the Fibonacci 38.2% level the price may be at or close to a reversal point.

After a reversal the first resistance will be the EMA(10) moving average (blue line) at 45 cents which is pointing down. Other levels of resistance to overcome are shown at 48 cents and 60 cents (blue horizontal lines).

Looking at the indicators:

I have used a RSI(5) instead of the usual 14 period because this is more sensitive to oversold conditons and reversals. Yesterday it was at 23%,  having bounced up from Tuesday’s 20% level. The RSI is presently oversold and pointing up – bullish.

The Slow Stochastics is forming a very bullish looking “W” formation below the 20% level in the oversold region.

The Chaikin Money Flow (CMF) indicator shows increased selling pressure in the last few days. This indicator should be monitored daily to detect when this selling pressure starts to subside.

Outlook: Seafield appears to be looking for a bottom around current levels, so a bullish reversal could occur in the very near future.

Note:  The writer holds a position in Seafield.