Mintails Limited (ASX:MLI), formerly Gaming and Entertainment Group Limited) is a gold exploration and development company with the projects located in South Africa. In December 2005 the company changed its principal activity from investment in and development of online gaming and entertainment technology to mineral exploration and development, focusing on treating tailings in South Africa.

The stock saw increased trading volume when the company changed its core business and became a gold exploration and development company. In the last few years before that, the liquidity was poor and the price action was meaningless. But since January 2006 the stock took advantage of the rising gold price and the global boom in natural resources and commodities-related stocks.

The stock jumped from $0.20 in early 2006 to a high of $0.95 one year and a half later therefore a rise of 375% in 18 months. The price fell sharply until August 2008, bounced back and then fall again until yesterday when it reached the original price (with the gold business) of $0.20.

It is, of course, a strong support. Since MLI has been involved in the gold exploration business, the stock never traded below this level. The stock has plunged 65% since mid-April and the likely coming technical rebound on the global equity markets should give it some fresh bullish momentum.

Yesterday the stock jumped 15% after hitting its support. There is more to come.
The volume spiked yesterday (roughly 3,250,000 while it’s usually less than 1.5M). It means that the money flows back into the stock. Don’t forget that price is the shadow of volume. In another way, volume creates price.

The OBV (On Balance Volume) is the indicator that shows this relationship. It spiked yesterday and confirms then that a lot of buying interests from investors are building up some upside move.

Moreover, as the stock has been recently hammered, it is now clearly oversold it argues too for a sharp technical rebound. The Relative Strength Index and the Stochastic Momentum Index reached very low levels recently and jumped back yesterday to cross above their signal lines. That’s bullish for the near-term.

In this scenario it is likely that this volatile stock will retrace quickly a large portion of its recent fall. The target may be then the 50% retracement ratio of the plunge that occurred between mid-April and mid-July (points A and B on the short-term chart). The price objective for the coming rebound could be consequently $0.42 (which is a potential 82% rise).

Only a break and a closing price below the support of $0.25 would invalidate this rebound scenario.

[Ed note. Neither the author nor any of the employees of Port Phillip Publishing own shares in Mintails. This article does not give trading or personal investment advice, but is intended to illustrate the principles of technical analysis. Consult your financial advisor before making any decisions.]

By Gabriel Andre

This article is contributed by Money Morning. Click on the link below for more information and to subscribe to their free newsletter /20080718/technical-spotlight-mintails-limited .html”

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