Echo Energy looks oversold as it hugs support line (ECHO)

Echo Energy (LSE:ECHO) recently completed its current drilling campaign with the rig now off contract and demobilised. As it prepares for the next phase of activity, a look at the share price chart reveals the stock is hugging a line of support.

The current macro sentiment has been weighing down on stocks generally with recent volatility likely causing junior stock investors to take a more cautious approach. So, while the price dip might offer a good entry point for Echo during this potentially quieter news period, any market wobbles could jolt the price below this near-term support level.

One thing to watch for is a break past the steep red line of resistance shown on the chart. This would potentially invite a rally to around 12-13p, particularly since the stock is very oversold at the moment. A decision on whether the price action steps to the right of that line or falls below the current support line (thin black line) is imminent. If support is broken there’s an additional cushion around last autumn’s lows of 8.5p.

turning our attention upward once again, there are also two gap downs that might get revisited. For no obvious logical reason, gaps invariably get filled at some point on price charts – one of the great mysteries! There are currently previous gaps down from 14p and 16.2p that could be short-term upside targets.

A sizeable chunk of Echo’s current £47m Market Cap is backed by cash with the company’s cash balance standing at £26.1m as of 30th June. As stated in their last update to shareholders, Operationally, Echo expects to be able to mechanically stimulate EMS-1001 and hopes to commence this by year end along with the planned stimulation of ELM-1004.

Author: Stuart Langelaan

Disclosure: The Author holds a position in the company mentioned above

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