Small-Cap Oil Company Ready to Break Out
Source: Clive Maund for Streetwise Reports
March 12, 2018 (Investorideas.com Newswire) Technical analyst Clive Maund discusses why he believes this small energy company that is "off the radar" of most investors is ready to break out.
I recently wrote an alert on Torchlight Energy Resources Inc. (TRCH:NASDAQ):
"The huge short seller who has kept a lid on Torchlight Energy (TRCH on NASDAQ CM, last $1.23) for so long is soon to be annihilated, because the company is doing horizontal Frack drilling with results due out soon that for various reasons are expected to be positive, and the company has a huge land position that could contain a vast quantity of oil.
Technically the stock is under heavy accumulation whilst at the same time being suppressed by the short seller, but he is likely to be blown away once the results become available. Price looks like a coiled spring on charts. IMMEDIATE STRONG BUY. Full update later."
Evidently you are taking me more seriously these days, because after this alert was sent out Torchlight took off and ended up 11.7% higher on the day. Here is the chart for the time just before the alert was sent out.
And here is the chart for the close:
Although this was a good gain, it did not constitute a breakout and we would have to be very fortunate for our short seller friend not to show up again at some point soon and beat it back down again. However, the key point to note, and which is the reason that we disregarded him and went for Torchlight today, is that for both fundamental and technical reasons he is almost "out of time," and if he doesn't voluntarily remove himself from the scene, which will cause a sizable rally, he will be "blown out of the water" which will also cause a sizable rally. Why? Because fundamentally Torchlight is due to complete drilling of a horizontal Frack well soon, and there are various reasons to expect the results from this well to be good, and if they are it will imply that there is an awful lot of oil under Torchlight's extensive acreage. So if the results are good the stock will soar, with the price spike doubtless accentuated by the plight of the short seller, and as we will now proceed to see, the stock is in position to do just that, after completion of a giant 3-year long base pattern.
With respect to the strong technicals, on the 8-year chart we can see all of Torchlight stock's history from its inception, and clearly it has been long and tortuous. The first important point to observe on this chart is that it is now historically cheap, since it got as high as about $5.50 back early in 2014. Next, it appears to have been marking out some kind of base pattern from early 2015. Whilst it is initially rather hard to define what this base pattern is, on close inspection we see that it is in fact a giant Cup & Handle base, with an embedded Double Bottom within the Cup part of it, and it was the destiny of our short seller friend to push it lower and lower over the past year to form the Handle part of the pattern, which it is very important to observe appears to be completing above the line of support shown. The Accum-Distrib line and On-balance Volume are both positive relative to price, with the former looking very impressive, as it is already close to making new highs. These volume indicators are both bullish and imply an imminent upside breakout from the pattern.
Torchlight has disappointed investors for a long time now, including us as we had expected more of it, and most, including us, have left for pastures new and not bothered with it. For this reason the majority will miss the breakout and new bull market when it occurs, but on this occasion not us, as we like to check back on situations like this from time to time. The setup on our long-term chart looks very potent indeed, especially because it is now "off the radar" of most investors.
Conclusion: it looks very probable that Torchlight will break out soon into a powerful bull market, and it remains a strong buy here after this afternoon’s gain as it still only at the point of breaking out. Any short-term dip caused by the short seller will be occasion to accumulate more of it, but with the approach of the drilling results, it is less and less likely to react back significantly.
Torchlight Energy website
Torchlight Energy Resources Inc, TRCH on NASDAQ CM, closed at $1.33 on 8th March 18.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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1) Clive Maund: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. CliveMaund.com disclosures below. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Torchlight Energy. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Torchlight Energy.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Torchlight Energy, a company mentioned in this article.
Charts provided by the author.
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.
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