We have been following Smartcool Systems Inc. (SSC:TSX.V) for a while and although the technical condition of the stock has been improving steadily up to now it hasn't done muchóbut that looks like it is about to change and fast. As you may recall the company has developed proven technologies that help users make big savings on their energy bills associated with air conditioning, heat pumps and refrigeration units etc. The big news now is that, after successful trials of its products at a test site, it is going to be concentrating on Blockchain applications, cryptocurrencies and cannabis growers, areas where a big proportion of the business costs incurred are associated with energy usage, so the demand for the company's products in these fields in order to make savings is likely to be huge. This is the reason that the stock surged yesterday on this news, but because volume in the stock was much more impressive than the gain in price, the implication is that much bigger gains lie ahead.
Smartcool's products result in a drastic reduction in energy consumption by heat pumps.
The move by the company into the areas of Blockchain applications, cryptocurrencies and cannabis growing, after long preparation, is expected to spark the breakout and major bull market in this stock that we have been expecting for some time.
On the 6-month chart we can see how the stock gapped higher on the news yesterday from a low level after its recent dip, rising 40%, but what was more impressive was the volume, which exploded to a very heavy 14.5 million shares, am all-time record by a huge margin. This high volume gap move coming at a time when the stock is already set up to enter a major bull market, means that the stock is set to go much higher. Notice how it paused yesterday at a line of relatively minor resistance, giving us the opportunity to zoom in and scoop it up by the bucketload at a good price this morning (assuming they donít mark it up at the opening, which they probably willóin which case it is worth chasing it). We are already long the stock but after this positive news it is worth buying more.
The long-term charts help us to put recent action in perspective. The 10-year log chart opens out the base pattern that has been forming since 2012, for nearly six years, and enables us to see that it has taken the form of a giant Head-and-Shoulders bottom. The upper boundary of the pattern is the clear line of resistance at C$0.10 and it is a strong buy at any point below that, as once it breaks above this level it should take off strongly higher, and not be too troubled by some overhead resistance it will encounter along the way. The surging volume and strong On-Balance Volume line suggest that such a breakout is near at hand.
On the 20-year arithmetic chart, the low base pattern looks like a Pan base. This chart shows that the stock got as high as C$1.70 in 2007, which is more than 20 times the current price, and that was before the company really got its act together, as it has now, which makes the recovery potential of this stock clear. Although the high number of shares in issue now at 306 million will make it more difficult to attain those earlier levels, it is worth noting that leverage will be improved by the fact that 190 million of those shares are owned by management or otherwise tightly held, and in any case the high number of shares in issue has already been factored into the stock price, which goes a long way to explaining why it is so low.
The conclusion is that the outlook for this stock is very bright indeed and it is expected to proceed to make big gains, regardless of what the market as a whole does, so holders should stay long, and it is rated a strong buy here at the current favorable price, and considered worth going overweight on.
SmartCool Systems website.
SmartCool Systems Inc, SSC.V, SSCFF on OTC, closed at C$0.07, $0.06 on 31st January 18.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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1) Clive Maund: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. CliveMaund.com disclosures below. I determined which companies would be included in this article based on my research and understanding of the sector.
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Charts provided by the author.
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.