It’s pretty rare to have a small company both set up nicely from a technical perspective while also making headlines at the same time. That is what's happening with our newest pick, as the company has announced both the closing of a financing round as well as securing 100% ownership of a project that is the flagship of the company. Vertical Exploration Inc. (TSX-Venture:VERT) seems to be making all of the right moves, and traders seem to be noticing as the stock has begun its upward trend back toward its 52-week high. The stock performed well on Wednesday as shares closed up at $0.165/share (+26.92%). We anticipate this momentum carrying over for the rest of Q4 as well as to the beginning of next year. Let’s dig in to the technical setup and risk profile of the stock after we get a little more basic corporate information.
Background:
Vertical Exploration Inc. is a junior mining company. It is engaged in the acquisition, exploration development, and evaluation of mineral properties in Canada. The Company’s flagship asset, the St-Onge wollastonite project, is located in the Lac Saint Jean region of Quebec, and Vertical’s objective over the next 24 months is to fast track this world class deposit into an economically-viable project.
VERT Trading Strategy:
Due to the massive rally we saw on Wednesday as shares went on to close at $0.165/share (+26.92%), in order to not miss out on any continued momentum, we like the entry at Thursday’s open.
Support for this stock is very concentrated on a relatively small zone. Up first is a combination of the three major SMAs that we like to track. The 50-day, 100-day and 200-day SMAs all converge to create a support zone between $0.13 and $0.14. Following this significant support zone lies the recently-made October low at $0.12 that should, in our view, be seen as the final support before a downtrend begins. With that being said, in order to avoid ruin while still giving this move enough room to breathe, we have decided to set our stop loss at $0.11/share.
As for the resistance side of this play, luckily it is a pretty straight forward layout. Up first we have the September high of $0.20 that preceded a decent selloff last month. Up next, we had to go a little further back to find the March peak of $0.295, which was also the 52-week high. We anticipate this momentum carrying the price through these two levels and to our price target of $0.30/share.
With these risk parameters in place and using Wednesday’s close of $0.165 as the proxy entry price, this play is shaping up to have +81.82% upside while risking -33.33%. We anticipate this move occurring within the next six to seven months.
