BMR first introduced Richfield to our readers last December at $1.20. Friday, it closed at $2.20 for a gain so far of 83%. Like Gold Bullion, though, we strongly believe the best is yet to come from Richfield which is developing the potential multi-million ounce Blackwater Project in central British Columbia. We interviewed Peter Bernier, Richfield’s President and CEO, last spring and we have complete confidence in his ability to steer this project forward. Our take on Bernier is that he wants to prime Richfield for a potential takeover with the strategy being to prove up as many ounces as possible and then find a major to develop it. On Friday, Richfield announced a proposed private placement financing of nearly $15 million at $1.95 per share with a half warrant at $2.50. This will give the company nearly $20 million in its treasury to make things happen with Blackwater. Following the financing, Richfield will have approximately 36 million shares outstanding and 50 million on a fully diluted basis. Assuming Richfield is able to substantiate a deposit of 4 million ounces, which appears very possible, a conservative valuation of $50 per ounce in the ground would give this company a market cap of $200 million (its current market cap, including the proposed 7.5 million share financing, is $80 million). So one can clearly see the upside potential that still exists with this even though the current price is just a nickel below the 52-week and all-time high. Below, John takes a look at this very interesting stock from a technical perspective:
Last week, Richfield opened at $1.91, traded as low as $1.75, then climbed to $2.25 to match its all-time high. It closed Friday at $2.20, up 30 cents or 16% for the week on total CDNX volume of 1.8 million shares.
Looking at the 12 month weekly chart we see that RVC has traded within a horizontal channel or, in otherwords, a horizontal consolidation flag. The top of the channel (blue line) is resistance and the bottom (green line) is support. The dotted green line is an intermediate support level at which the stock could retrace to if a breakout attempt fails. This channel creates solid support for a move up. The weekly SMA(10) provides strong support within the channel during this upswing. The two recent white candles show the stock has risen strongly from the $1.60 level on higher than average volume. Last week’s volume was the highest in the last 12 months. Should the stock overcome the $2.25 resistance, the next Fibonnaci target level is $3.50. This is derived by adding the depth of the channel ($1.25) to the top of the channel ($2.25).
Looking at the indicators:
The RSI is at the 66% level, below the overbought region, thus giving the price a long way to move before reaching unsustainable levels – bullish.
The ADX trend indicator has the +DI (green line) above the -DI (red line) and the ADX trend strength line (black) is at 29 with plenty of space to move up before it reaches unsustainable levels. When it gets to 40 or above watch carefully for a possible trend weakening. Also, remember the +DI usually peaks before the ADX line. This is a very bullish orientation.
The Chaikin Money Flow (CMF) indicator is green and shows that the buying pressure has been increasing for the past 3 weeks with last week the highest – very bullish.
Outlook: This is the third time in the last 12 months the stock has attempted to move out of the channel to the upside. The chart and the indicators are all saying that this is the strongest challege yet to the $2.25 resistance. If the volume is there, this stock has an excellent chance to reach new highs next week but keep in mind there is a financing underway. One possibility is that Richfield could run to a new high before pulling back and finding new support around $2.25 until the financing closes.