Zak Mir...24 Mar 2015 13:05
"Mercom Oil Sands (MMO) Ultra oversold position could provide bargain hunting opportunity
Although it can be seen from the daily chart of Mercom Oil Sands (LSE:MMO) over recent months the shares have certainly struggled to make headway, it may be that bottom fishers will have an opportunity to get their teeth into a situation which could provide decent upside.
Such an observation is said on the basis that not only does the price action here appear to be extremely overdone on the short side, the risk / reward of Bulls returning to the fray appears to be rather more palatable than it did even a few weeks back. For instance, the RSI now around the 13 level is extremely oversold and as oversold as it has been at any time over the past couple of years. This would suggest that we are due a significant snap back imminently, and that it may be worth being in place here on the long side from this point on. When you add in the way that this oversold state it appears to catch the stock at the floor of an extended wide price channel from the summer of 2013 and there is another driver for the Bulls.
The alternative to straight bottom fishing would be to wait on a momentum buy trigger, which at this stage is seen as being ideally an end of day close back above the 20 day moving average at 6.98p, a feature which has capped the shares since as long ago as July. Above the 20 day line it seems fair to target the area towards the 200 day moving average at 13p /pre July support – over the 1-2 months following any 20 day line break.
Written by Zak Mir, Head of DirectorsTalk TA. Zak Mir is one of the UK’s best known and experienced technical analysts, having over 2 decades of charting experience.
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