6:15 am Pacific
Once each week at BMR, our technical analyst highlights a junior resource stock (outside the BMR Portfolio) that shows very favorable chart patterns. Investors/traders of course should perform their own due diligence, as always, and consider fundamental factors as well. This weekly feature is merely meant to introduce some possible opportunities that readers may wish to investigate. This morning, John takes a look at Sandspring Resources (SSP, TSX-V) which closed yesterday at $1.45:
John: Sandspring Resources is developing a very promising open-pit gold deposit in Guyana. The following is taken directly from their web site:
“Sandspring is an exciting, relatively new public company representing 10 years of private operational experience in the Republic of Guyana. The former private company predecessor is now a wholly owned subsidiary of Sandspring. The production history of the Company is surface alluvial and saprolite mining in Guyana.
The future of the Company is based on development of an underlying primary bedrock gold-copper deposit at Toroparu discovered in 2007. To date, a total of 900 metres of strike length have been drilled on a 10 kilometre alluvial gold trend defined by historical artisan mining in this historically rich mining area in the Upper-Puruni River region.
The latest Topoparu gold-copper deposit mineral resource estimate (released June 3, 2010) was independently modeled by P & E Consultants Inc. of Toronto as a potentially open-pitable deposit. The single open-pit optimized pit shell model features an NI-43-101 compliant indicated mineral resource of 3,692,000 ounces gold-equivalent (2,891,000 oz. gold and 288 million pounds copper) with an an additional inferred mineral resource of 1,078,000 ounces gold-equivalent (895,000 oz. gold and 66 million pounds copper).”
Further to the above announcement Sandspring presented new drill results including 151 metres of 1.07 g/t Au in Hole TPD-80, 400 metres northwest along strike on step-out from the current Toroparu gold-copper resource.
In addition there has been recent insider buying and with only 80 million shares fully diluted this company, located in a calm political climate, is certainly worth some serious due diligence.
Yesterday, Sandspring opened at $1.35 and then climbed steadily through the day to close at its high of $1.45 – up 12 cents (9%) on very light volume of 46,000 shares.
Looking at the chart we see that from March 1 to May 10 Sandspring traded in a steady decline and bottomed around $1.10. Since then it has consolidated in an ascending triangle with the horizontal blue line the resistance level and the green sloping line the trendline support. On two occasions the resistance has been hit but both times the volume was very small, so to break down this resistance the stock needs a substantial increase in volume.
Looking at the indicators:
We see that the RSI has broken above the 50% level and reached 63% – bullish.
The Slow Stochastics shows that the %K (black line) crossed above the %D (red line) below 20% and both are heading up – bullish.
The ADX trend indicator shows the +DI (green line) has crossed up over the -DI (red line) – see thin vertical blue line – and is climbing. The ADX (black line) trend strength indicator is low at 18 and has started to turn up – a very bullish scenario.
Outlook: With the chart pattern and indicators in a very bullish arrangement, the main ingredient needed for Sandspring to make a good run is a large increase in volume. For interested readers, a safe entry point here would be if the price breaks through the resistance and closes above it for two days on high volume – then a break has been established. Put this one on your watch list.