BullMarketRun.com

Friday’s intra-day turnaround by the broader equity markets was impressive to say the least, while Gold finished the week in sparkling fashion thanks to shifting U.S. interest rate expectations.

Equally noteworthy Friday was the powerful intra-day move by Equitas Resources (EQT, TSX-V) which tested superb chart and Fib. support at 15 cents, and then immediately reversed and charged like a raging bull in the final few hours of trading to close at 20.5 cents on total volume (all CDN exchanges) of 4.4 million shares.  What ignited the rebound may have been a combination of factors.  Keep in mind that once a company is drilling a very prospective project – in this case a grassroots property that has the potential to deliver an important fresh discovery – an extraordinary surge can come at almost any moment.  A quality Canadian exploration play, if it’s being managed by the right people as it is in the case of Equitas, still carries considerable risk but also offers incredible potential leverage that’s simply very hard to find with any other financial instrument.  History has shown us the truth of that.

Technically, the significance of the end-of-the-week move by Equitas cannot be understated.  Below are several key “takeaways” from John’s updated 3-month daily chart:

1.  As we pointed out during the last half of September, EQT started forming a “pennant” that was similar to the one in August that lasted 13 sessions and ultimately led to an important breakout (pennants are generally expected to last 15 trading days or less).  Interestingly, EQT staged a breakout above this 2nd pennant also on the 13th session Friday (who said “13” is an unlucky number?).  Technicians will look for “confirmation” Monday;

2.  Not only was EQT trading in a bullish pennant pattern the past couple of weeks, but note also the broad upsloping channel with support at 15 cents which also includes the previous Fib. 15-cent resistance (additional new support).  Nervous nellies who were dumping in the mid-teens Friday simply may not believe in (or understand) technical analysis.  TA is as much of an art as it is a science, but an investor’s toolkit must include the very important TA component;

3.  RSI(14) found support around 50% just it like it did when the stock consolidated in July and August.  RSI(14) is now at 61% with plenty of room to head higher;

4.  Even during the recent healthy pullback from the high of 21.5 cents September 15, buy pressure (CMF) in EQT remained steady and in fact started to increase at the end of September;

5.  The ADX indicator shows a very bullish trend with no extremes yet.

It’s not unusual for speculation to build while the drill keeps turning.  To use a baseball analogy, EQT is swinging hard in just the very first inning of what could turn out to be an incredibly exciting game.

Note:  Both John and Jon hold share positions in EQT.