In the last update on DroneShield Ltd. (DRO:ASX; DRSHF:OTC) we had not expected it to react back as far as it did, believing that the support at A$0.20 would hold. It didn’t, which may be largely due to adverse conditions afflicting markets generally at the time.
However, the fundamentals of the company have continued to improve at an ever more rapid rate, with the company CEO stating “We believe that we are now at an inflection point with a number of high profile customers, with the next step being regular multi-million dollar orders, which we expect to commence through 2H22.” and clearly, you can’t ask for much more than that.
With this prospect, it’s a small wonder that the stock broke higher on Friday.
On the latest one-year chart we can see that, after breaching the support level at A$0.20 in June, the stock tracked sideways in a narrow rectangular trading range between the failed support at A$0.20 that became resistance and the strong support a little lower down at about A$0.17.
Volume became light as the stock marked time in this range waiting for the 50-day moving average to drop down close to the price and for the fundamentals to continue improving.
The volume buildup at the end of July telegraphed an impending upside breakout that occurred on Friday. Given the now excellent outlook for orders and earnings, only helped of course by the deteriorating situation in Taiwan, this move is believed the mark the start of a major uptrend, so there is much more to go for.
The long-term six-year chart shows us that, apart from a couple of sharp runups, one at the end of 2016 going into 2017, and another in the middle of 2019, Droneshield has basically been tracking sideways.
Now, with the outlook for orders and earnings improving dramatically, it is clear that there is everything to go for here as the stock has barely moved yet.
The outlook for Droneshield could scarcely be better, so we stay long and this is a good point to make fresh purchases or add to positions. The stock is rather thinly traded on the US OTC market where limit orders should always be employed, although volumes should pick up as the price rises.
Droneshield Ltd. closed at A$0.21, $0.17 on August 5th, 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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