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There is a BUY signal on Petrel Resources (LSE:PET). This market is in an intriguing situation as buying pressures now exist on the stock. Pressure is what makes a market move in a direction, and it showcases what bulls and bears are doing and the kind of emotions they have. What is happening on the chart reveals that the price is now caught in a new bias – northward bias, according to the methodology used here. Trading methodologies essentially have the same aims and objectives.
Technical Forecast
Until very recently, this stock was in a predominantly downtrend. Nevertheless, the price is currently caught in a northward breakout. 2 parallel trendlines and the Relative strength Index (RSI) period 14 are used in this chart analysis. We can see that from late June 2012 to late September 2012, the market was in a serious equilibrium zone; neither the bulls nor the bears had a commendable victory. Very short-term rallies were abrogated by abortive bearish corrections. Yes, the bulls and the bears reached equilibrium zones. The stock would go up only if buyers are considerably more than sellers. The price was at 7 when this article was being prepared. There are accumulation zones at the price levels 6 and 5. There are distribution zones at the price levels 8 and 9.
Recently there was a strong bullish breakout that cut through the upper trendline and shot up the price. The significant bullish engulfing candles that were formed succeeded in closing above the upper trendline (a bearish signal would have been generated if the opposite happened). You might not know what phase of market bias is prevalent right now. Would it be the beginning of another downtrend wave or just the end or the middle of it? If it is the middle, then the momentum would subside a little – otherwise it would be a reversal. This is what is happening right now. Do not be surprised if pullbacks occurred in this market. It is supposed to happen because the RSI is already in the overbought region, i.e. above the level 80! After this temporary reaction, the bullish pressure could get strong again. As long as the price does not come back to the upper trendline, and the RSI 14 stays above the level 50, the ‘buy’ signal is valid.
Conclusion: You might think that the Petrel Resources stock would continue to fall, but when it eventually rises to the price level at 15, you would know that your assumption is wrong. Along the way, there would be pullbacks and consolidations (but they are presumed to be short-lived). The smartest thing to do, however, is to smooth an order if things go contrary to anticipation. The major point is that there are many risk control options that can be employed in the game of speculation.
This article is ended with the quote below.
“If you think trading for a living is the same as investing, you are way off base. You need to realize there is a vast difference between the business of investing and the business of trading. You need a wake-up call if you are trading from desperation or the opinion of others — even your own opinion is worthless! You cannot change the market with your opinion. The only thing you can do, if you want to win, is to get in step with the market.” – Joe Ross
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