On Feb 27, 2012 Encanto Potash(EPO-TSX.V) announced the successful Mineral Rights Designation vote with joint partners on the Muskowekwan Home Reserve, increasing the land position 300% to 58,300 acres. Daily trading volumes for Encanto have also spike 300% in February to 3.3 million shares per day. In this issue of Gold Editor, Growth Stocks Weekly analyses the technical fundamentals of EPO.
February 23, 2012
With permission we are forwarding to you the following emailed alerts sent by Richard Reinhard to his subscribers yesterday and early this morning, providing his technical commentary on the trading of Encanto Potash. Richard's website and subscription service can be found at www.growthstocksweekly.com and we thank him for allowing us to forward his thoughts.
From: Richard Reinhard's Growth Stocks
Sent: February 23, 2012 8:15 AM
Subject: Encanto Potash (EPO-TSXv): Addition to holdings
Last night’s comments provided yet another heads up, in this case to take advantage of an overdue correction as Encanto shares were sold off to a spike-low of
.355. We couldn’t resist the severe 25% haircut over 2 days and added 150,000 shares at
.375 to now hold 650,000 shares and 125,000 warrants in the GSW Model Portfolio. Chances are, once the Feb 25 vote approves the land additions into the JV we may see new institutional interest.
The following is an hourly chart with the Fibonacci Retracement levels portrayed. Basically this shows what the trading looks like since Feb 1st. Chances are we’ve seen the lows for the correction given the climactic volume (not scaled well here, but it is very high at the spike, and now drying up).
Editor’s comments: Given the start of a healthy correction today off the
.475 high marked yesterday, subscribers may benefit from a look-back to our comments made in our Feb 2 Update Report:
“Technically the share price has seen a strong base form at the
.25 area. A reverse head and shoulders formation with a neck line at
.285 is setting up, projecting a breakout from the neckline that should be free to run to the
.435 area (Projected price target = [0.285 neckline - 0.135 low] = 0.15 + 0.285 = 0.435). This target exceeds the next resistance area at the Fibonacci line found at
.385, but given past performance and the large audience developed for the company over the last 2 years it is easy to see a momentum move that exceeds simple technical levels. Liquidity is very good most days, and we saw two block trades done today that followed almost two weeks of aggressive “anonymous” selling. Volume today was the highest daily total since last March 21. This may mark the end of what appeared to be a very large institutional sell ticket. Maybe good timing for the buyers, who stood in and took over 30 million shares out within a tight trading range between
.28 since early January.”
Our technical target was
.435 based on a measured move projection, and we sailed through that on Friday, and yesterday saw further gains to a price close of
.46. Today was another story - marking the first correction since the shallow one-day affair of Feb 10 - and certainly a little scarier for complacent investors lulled into the daily patter of aggressive buyers versus increasingly reluctant sellers seen since the Feb 2 price lift-off, the same date our comprehensive
Update Report was released and distributed.
So where to now you ask? There’s no argument that the share price was over-bought and technically ready for a breather. Our expected significant support area sits at the
.385 Fibonacci line. This is the same level where our 13-day EMA sits on the daily chart (not shown on the "bigger picture" weekly chart provided below). There is also minor support at the
.405 level on the daily chart which came into play today, and maybe that will hold. Keep in mind we’re approaching month end which often requires funds to be raised or debits covered, and also the First Nations vote for the additional lands designation to be held on Feb 25 . Typically we would expect some risk-coverage selling ahead of the vote – just in case – and to get ahead of the potential "sell on news" crowd we have all seen take stocks down even with excellent news. Markets are forward-looking after all, and anticipate foreseeable events rather well.