Contributed Opinion

In this article we are going to see why Lithos Energy Ltd looks set to commence a major bullmarket as it on the point of breaking out upside following a long period of consolidation.

We will start by looking at a 1-year arithmetic chart which gives us an overview of the stock’s history from when it started trading last February following a restructuring or reorganization of the company. On this chart we see that immediately after it started trading early in February it went into a small Pennant consolidation that led to a significant advance for about 2 weeks, but after that it ran off into a long period of consolidation that, apart from a rally into early September that was completely reversed, has continued right up to the present. Throughout this consolidation the Accumulation line has been trending steadily higher which is a strong positive divergence suggesting that a new bullmarket phase is incubating. The downtrend from the ephemeral early September peak gradually eased with the price finding support and stabilizing at the strong support level in the C$0.52 – C$0.54 zone which marks the lower boundary of the trading range. Now we will proceed to look at recent action in more detail on a 6-month logarithmic chart which makes it more easy to see what is going on.

On the 6-month chart we see that the decelerating downtrend from the early September peak has taken the form of a 3-arc Fan Correction. While you can have more than 3 arcs, generally, once the price breaks above the 3rd fanline, especially if there is marked diminution in downside momentum which the MACD indicator climbing back to the 0 line shows to be the case, it normally marks completion of a reversal and the start of a new bullmarket – and the price is now close to breaking above the 3rd fanline. The probability of Lithos Energy breaking out into a new bullmarket soon and probably very soon is greatly enhanced by the strongly bullish volume pattern, especially recently – we can see the persistent heavy upside volume so far this month that is driving the Accumulation line to new highs as the price approaches the completion of a bull Flag or Pennant that has formed in the vicinity of the 50-day moving average which is now turning up. So a very important breakout looks imminent and it will be very important because it will involve a breakout from the Pennant, a breakout above the 3rd fanline of the Fan correction and a breakout above the nearby quite strong resistance level shown <I>all at about the same time</i>. It will thus have great technical significance and should mark the start of a major bullmarket in the stock.

Lithos Energy is therefore rated a strong buy for all timeframes.

Lithos' website.

Lithos Energy Ltd., LITS.CSX, closed at C$0.61 on 19th January 24.