A Toronto-based junior miner was halted during Tuesday’s trading session as the company was expected to make an announcement. This made traders a bit antsy as the pending news could have numerous effects on the stock price. In the end, the announcement was made that the company received key approval for its Rovina Valley Project from the Romanian Government. The release went on to say that this approval was a significant milestone in the permitting process to advance the project.
Shares of Euro Sun Mining Inc. (TSX:ESM) briefly shot up to a session high of $0.44 (+12.82%) and went on to close at $0.40 (+2.56%). This short term surge indicated a brief demand for shares that could be an indication of things to come as the company expands its operations within the Rovina Valley Project. This feat paired with the technical setup and risk:reward ratio got us excited about this stock for the intermediate term, but before getting into the specifics of our trading strategy, first a little background of the company should be provided.
Background:
Euro Sun Mining Inc. operates as an exploration and development company that focuses primarily on gold and copper exploration on its property in Romania. It holds interests in its 100% owned Rovina Valley Project (RVP) located in west-central Romania.
ESM Trading Strategy:
Because we briefly saw a strong intraday breakout on Tuesday, we think this could be an indication of things to come so we like the entry on Wednesday’s open. To get it out of the way, let’s discuss potential resistance levels. Up first we have the April peak of $0.465. There is quite a bit of room to run until the next level at $0.57 that served as key resistance last August. This level is followed up by numerous consolidation points from the month of August that peaked at $0.63, which is where we set our price target.
Thankfully with this play, support levels are plentiful and more importantly, relatively tight to current prices. Up first we have the 50-day SMA currently at $0.386. Immediately following this is a strong May 2021 consolidation level that seems to bottom at $0.37 on numerous occasions. To finish out support, there is a combination of key moving averages immediately following the May consolidation; the 100-day SMA at $0.366 and the 200-day SMA at $0.36. After these, there could potentially be a selloff, so to avoid ruin we have set our stop loss at $0.349/share.
With these risk parameters in place and using Tuesday’s close of $0.40/share as the proxy entry price, this play is shaping up to have +57.50% upside while risking -12.75%. We anticipate this move occurring within the next five to seven months.
