We bought back Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LLO:ASX) in the middle of February after sidestepping a severe drop, and while we were right about it being undervalued — it was and is — we were too early as it dropped even more while in the process of marking out a base pattern.
On its latest 4-month chart, it is now clear what is going on. We bought about halfway into the Left Shoulder of what we can now see is a Head-and-Shoulders bottom that is fast approaching completion. With the benefit of hindsight, we can see that after the severe decline it had suffered, it wanted to allow time for sentiment to recover, which is why it meandered around, marking out a Head-and-Shoulders bottom.
At this point, it looks like it is working on completing the Right Shoulder of the pattern, and once it has, we can expect it to break out upside; the chances of this happening are, of course, improving with time as the sector not long ago embarked on a major bullmarket. Additional bullish factors to observe are the marked pickup in upside volume from late last month, which is at last starting to have a positive effect on the weak Accumulation line, and the rapid improvement in momentum (MACD), which is trending briskly higher. In addition, the current large gap with the falling 200-day moving average is a measure of how oversold it is, and this is creating snapback potential.
On the 10-year chart, we can see that the severe bear market from the 2020 peak has erased 80% of the stock's value. It is as if the company's gold reserves on Fiji had grown wings and taken flight from the island, departing Melanesia and heading for some Polynesian island such as Easter Island — or perhaps it is simply the amnesia of investors.
In any event, it is underpriced and undervalued here with further discovery potential, and Bob Moriarty of 321gold recently said so, too of course, its potential for revaluation is likely to be greatly augmented by the continuation and acceleration of the major PM sector bullmarket that has just begun.
We, therefore, stay long, and Lion One is rated as a Strong Buy for all timeframes.
Lion One Metals' website.
Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LLO:ASX) closed for trading at CA$0.49, US$0.359 on April 30, 2024.
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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. 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 cannot be only be construed as a recommendation or solicitation to buy and sell securities.
