Amerisur Resources (LSE:AMER) has bounced this morning, hitting 14p at the time of writing, and looks good to remain in its current trend channel, albeit a downward one. I’ve split my analysis into 2 charts since the price action of Amerisur is a great example of a stock that’s repeatedly respected and developed strong support lines, both horizontally and diagonally.
A look at the channel analysis chart first and you can see the current trending channel (purple) is really a continuation of previous trend lines – this should, in theory, strengthen the lower support line. Generally, the more times a trendline is hit, the more relevant it becomes. Likewise, I have sought to identify channels in both downward and upward trajectories – this leads me to a first Target for recovery around the 17.8p area. Having fallen through that bottom upward trendline in February, the price attempted to get back above it in early March but failed. With the Relative Strength Index (RSI) indicating the stock is again very oversold, it’s well positioned for another consolidation and retry from here as long as support is not broken – Of course it’s real life newsflow that will be the significant catalyst for buying strength, but with substantial drilling activity planned, anticipation could build in the share price over the weeks ahead.
Taking a look at the Step Analysis chart and you’ll see very evenly spaced out price zones or steps. These give an excellent indication of areas of resistance and support, particularly when combined with the diagonal trend channels and of course the Moving Averages. Initial resistance is expected at 15p, a breakthrough here could lead the price up to the next step at 17.2p. This area coincides with the upward channel line mentioned before. Add in falling 100 and 200 Daily Moving Averages (DMAs) and there’s quite a cluster of resistance forming in that zone. It will take progress from the company to reignite Amerisur’s growth story, but the chart is already looking very attractive for potential upside from a technical analysis point of view. With another draw in Crude Inventories last week by the EIA, and the oil market looking increasingly bullish, this could be a good time to give Amerisur a closer look.