After suffering for the last two months with a massive head & shoulders top pattern looming over their heads, shareholders of Novo Resources suddenly have a similar, albeit smaller, head & shoulders pattern underneath their feet:
NVO.V (Daily - 1 Year)
Chart patterns morph and evolve. Charts also experience transitions from one 'controlling' pattern to new controlling patterns. The impressive H&S top which was constructed between August and December triggered at the end of 2017 as price broke down below C$4.00 - Novo shares proceeded to drip nearly 40% lower over a roughly one month period following the December 21st neckline breach.
Since bottoming at C$2.45 on January 24th NVO has spent the last month wedging higher and bumping up against the C$3.80-C$4.00 resistance layer. A multi-week head & shoulders bottom pattern has been constructed during the last two months with Relative Strength (RSI) and Money Flow (MFI) rising to the highest levels since November.
Heading into next week Novo has its most bullish chart setup since last August, and we all know what happened then. With RSI breaking above the median line, pointing higher, and close to the 'sweet spot' (between 55 and 60) we have a potentially explosive recipe if price can break-out above the C$4.00 neckline. In fact, an upside breakout from the head & shoulders bottom would target a move higher to fill the open gap from late-December all the way up at C$5.51.
From my vantage point the risk/reward is attractive from Friday's closing price of C$3.65; with ~50% upside vs. ~20% of downside (one can place a stop loss below important support/resistance at C$3.00) the odds are currently favorable for NVO bulls heading into what could be a monumental market moving NR with the latest bulk sample results from its Comet Well project (which could be released as early as Monday).
A good read to get up to speed on the Novo story from @HHorseman - Pilbara: De Grey, Novo, and More Horseman Theories
Disclosure: Author is long NVO shares at the time of publishing and may buy or sell at any time without notice.
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