So far this week following the long weekend (U.S.), we have seen two red days in the broader equities markets. For a stock picker, these types of markets typically would lead to lower performance in the short term since the overall sentiment is low, however we have the luxury of picking both American and Canadian-based stocks, which gives us some flexibility due to the larger basket of securities we have to sift through.
Thankfully, following some rather strenuous filtering and sifting through our watchlists and fundamental screeners, we were able to dwindle this large list down to just a handful of securities to choose from. This handful quickly turned into one stock after seeing the massive outperformance and momentum displayed so far this week. Without further ado, let’s take a look at Thursday’s pick; Bearing Lithium Corp. (TSX-Venture:BRZ).
Bearing Lithium Corp operates as an exploration and development company in North America. The company is focused on identifying, advancing, and de-risking lithium projects. Its project includes the Maricunga Lithium located northeast of Copiapo in the region of the Atacama in northern Chile.
Bearing Trading Strategy:
Due to the surge we’ve seen since mid-December of last year and the strong performance on Wednesday as the stock closed up at $0.42/share (+7.69%), in order to not miss out on any continued momentum, we like the entry at Thursday’s open.
As far as resistance is concerned for this micro cap, because it’s trading right below its 52-week high, following this key level is pretty wide open until getting to 2018 levels. With that said, the near-term resistance is only 2 cents above current levels at the 52-week high of $0.44. Following this is the April 2018 high of $0.54 that served as pretty significant resistance. After these two key levels, it’s pretty wide open to run, and even though we’d love to say we’d see $1.00/share again, in order to not get caught up in any ceiling selloffs and to be more realistic with our approach, we have decided to place our price target at $0.75/share.
For the support side of this equation, the good news is that there is plenty of levels that should act as a floor in the near term should there be a selloff. The [somewhat] bad news is that these support levels come in the form of moving averages, so due to the quick rally we’ve seen over the last month, these indicators are naturally lagging a bit behind current levels. Up first we have the 50-day SMA that is currently at $0.312. Following this first support level is the 100-day SMA at $0.286. Anything below these two key indicators could be considered an intermediate trend reversal, so we have decided to set our stop loss at $0.28/share.
With these risk parameters in place and using Wednesday’s close of $0.42 as the proxy entry price, this play is shaping up to have +78.57% upside while risking -33.33%. We anticipate this move occurring within the next five to seven months.