Resistance is NOT futile

Thursday, 3rd May 2012 16:25 - by Moosh

Caza Oil & Gas (TIDM code: CAZA) Another nice example of how money flow divergence in a company listed on the Alternative Investment Market (AIM) pre-empted nearly a 100% rise in price (SP) over a couple of months. 1. A rise in daily money flow coincided with a falling SP between 29th November 2011 and 21st December 2011. 2. SP hit the top daily Bollinger band (20-day period) at the end of December 2011/start of January 2012 before finding support on the middle Bollinger support line during the first half of January 2012. 3. SP hit the top Bollinger on 23rd January 2012 before bouncing from the 9-day exponential moving average (EMA) on 31st January 2012. 4. At the start of February 2012, the SP rose to just above the top of the daily Ichimoku Cloud (at around 12.375p) - at this point the SP became particularly overbought on the slow stochastic oscillator. 5. Support on the daily middle Bollinger line occurred around 16th February 2012. 6. On 23rd February 2012, the SP opened at 15.75p (mid-price), which conveniently coincided with the 200-day EMA line; and which also happened to be when the SP became particularly overbought again on the slow stochastic oscillator. 7. The peak around 9th-13th March 2012 was lower than that of 23rd February 2012 (even though slow stochastic oscillator was overbought yet again) - lower SP highs suggesting a possible drop in SP could follow. 8. The RNS of 30th March 2012 (opening SP of 13p coinciding with the 200-hour EMA) resulted at the end of the day in an unconfirmed bearish engulfing pattern, confirmed over the next few days as the SP continued to fall. I found this 2-month uptrend fascinating because, although news items were released at various points along the way (along with 'Sell on news' investors exiting), the actual peak of the trend occurred on no news. From the various technical points I observed in the above, it was (in my opinion) a clear technical uptrend, initiated by the money flow divergence in December 2011. The SP rose from 8.125p on 22nd December 2011 to 15.75p on 23rd February 2012, at which point resistance by the longer term 200-day EMA proved NOT to be futile.