There was a dramatic and startling drop in Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) on Friday when it plunged to close down 33.33%. The company has stated that it is “not aware of any material, undisclosed information related to the company that would account for the recent decrease in the market price and level of trading volume of its stock.”
Whilst this may or may not be true an explanation for this extraordinary drop may be that a large holder of stock got hit by a margin call, and in this situation, the broker can dump stock without consulting the owner. If this is indeed what has happened then it has thrown up an opportunity to buy the stock at a knockdown price at a time when the entire sector is looking set to recover after its recent severe decline.
What typically happens after a plunge like this, especially if it occurs on a Friday, is that the stock opens down again during the next trading session and heads lower in the early trade, perhaps temporarily breaching the support shown on our six-month chart, before swiftly reversing and climbing steeply to perhaps close up on the day, leaving behind a reversal candle such as a “hammer” or bullish belt hold” or possibly the star candle of a “morning star reversal.”
While it is a bit of a gamble a good play for the more audacious trader is to see how it opens the next session and then move in quickly if it drops again—even if it drifts lower perhaps for a few days, it is likely to recover before long.
The three-year chart shows how the plunge has taken it down to the lower boundary of the large trading range that started to form early last year. This chart also shows the origin of the strong support that ought to effect a reversal to the upside again, especially given the now much brighter outlook for the sector. We can also see how the closing up of the bullish Falling Wedge pattern shown led to the breakout and steep rally in June.
Conclusion: Getchell Gold is rated a strong speculative buy in the early trade at the next session. Stops are not considered necessary because even if it drops a little more it should then reverse to the upside.
Getchell Gold website
Getchell Gold Corp closed at CA$0.40, $0.325 on July 29, 2022.
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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 stock market 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.
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