By Zak Mir | Friday 24 May 2013
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Yesterday two of the top three risers in the whole London market were wedge breakout formations – Leeds Resources (LDP) and Noricum Gold (NMG), situations that I have flagged in the past week.
Zanaga is discussed here, although the whole wedge affair started with Vatukoula (VGM) which doubled last week in the wake of a double ShareProphets recommendation.
It would appear that the wedge formation breakout is the big formation of the moment, and certainly worth watching out for.
Indeed, Zanaga is one of the chosen few which has this set up, and given the way that there was massive volume in the shares today ahead of the 10% share price mark up this morning.
One can go so far as to say that it would appear that as far as this phenomenon is concerned we are justified in describing it as low risk / high reward.
The detail here is that we have had the price action held within converging trendlines since the autumn, with the ranges going into yesterday getting tighter and tighter within the formation until the lines were less than a penny apart.
As I suggested on AIM Stocks Charting yesterday, in such circumstances you would expect a positive breakout within a week or less – and this has come through today.
What can be said now is that given all the pent up demand associated with falling wedge formations, the worst thing to do no would be to assume a modest move to the upside and then either exit with a small profit, or of course go short.
The initial target at this stage is the April resistance zone at 17p plus as soon as the end of June.
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