At first sight,stock looks terribly uninspiring — it has gone nowhere for years and has quite a high number of shares in issue at 289 million, but by the end of this article, I'm sure you will agree with me that it is looking like an attractive investment here for various fundamental and technical reasons.
Fundamentally, the company has developed a sodium battery at a time when the market for these is potentially massive, although so far, I have not had time to ascertain what percentage of the company's business these batteries could become and what their capacity to scale up production is, this sounds like it could be a big deal.
Technically, the most important point to make is to restate the old adage: "Past performance should not be considered a guide to future performance." This works both ways, so just because BioLargo has been overall a rotten stock to own for many years does not mean it has to continue that way, and given how long the company has been around, the number of shares in issue is not so great.
Now, let's move on to review the charts. Starting with the 20-year chart, we see that despite the stock making some big tradable moves at times, overall, it has gone nowhere, and currently, the price is bumping along near to its lows at the miserable price of 17 cents. That said, however, there are a couple of very important technical points to make here.
One is that there has been a big volume buildup and persistent heavy volume in the stock since 2019, which is viewed as bullish because it means that there has been a lot of stock rotation from weaker to stronger hands, which is obvious because most of the sellers are selling at a loss and new buyers will be less inclined to sell until they have turned a profit. The strongly rising Accumulation line throughout this period is most encouraging, too, as it reveals that most of this volume has been upside volume — this alone suggests that a new bullmarket is incubating.
Zooming in via the 19-month chart, we see that BioLargo has been through a 3-wave A-B-C bear market from its September 22 peak that is believed to have been completed with the C-wave low of last August. Even though it has continued on within the downtrend shown since that low, it looks like it has been marking out a base pattern over the past month or two that will break it out of the downtrend, as we will see much more clearly when we proceed to look at the 6-month chart.
Before leaving this chart, observe how, even though the price has continued to grind lower within the downtrend for much of this year, the Accumulation line has shown marked positive divergence by trending higher all the while, so much so that it is considerably higher than it was at the September 22 price peak! — needless to say, this divergence is bullish and implies that a new bullmarket is incubating.
Now we look at recent action in much more detail on the 6-month chart on which we see that BioLargo is really indulging us with a small base pattern that has formed since mid-October that is at one and the same time a Cup & Handle base, a Double Bottom (with the August lows) and the action within the Cup & Handle can also be defined as a Head-and-Shoulders bottom so you can take your pick which one you prefer — personally I like all three.
The point is that whichever base pattern you consider it is, they all portend the same thing, which is a breakout from the downtrend channel that we looked at on the 19-month chart and other factors that weigh in to support an upside breakout, including the shift to more upside volume in recent weeks and the improving trend in momentum (MACD). Breakout will be signaled by a break above the resistance at the upper boundary of the Cup & Handle / H&S bottom, i.e., by a clear break above $0.1725, preferably on good volume and it is important to note that this will very quickly lead to a breakout from the downtrend channel shown on the 19-month chart as the price is now so close to its upper boundary.
The conclusion is that BioLargo is at a good entry point here, and it is rated a Strong Conservative Buy for all timeframes. Although it is not a glamorous momentum play like our Wonderful Tech, which is doing really well, it is considered to have substantial upside from here with the capacity to make faster gains than many consider possible, especially if there is anything to the sodium battery story, and an advantage is that it is comparatively low risk. The shares have good liquidity.
BioLargo Inc.'s website
BioLargo Inc. closed at $0.17 on December 21, 2023.
Originally posted at Clivemaund.com on December 22, 2023 at 8:00am EST.
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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.