Yesterday, Connemara Mining (LSE:CON), the gold and zinc exploration company, announced a maiden Inferred Resource Estimate at its Stonepark Zinc Project located in Ireland. After an initial modest gain of a few per cent, the share price closed down, and the price has slightly fallen again today to 3.42p as I write. The chart below shows a common set up – having peaked on excitement at 5.6p last November, a long drawn out pullback has been playing out.
On Monday, a strong bounce off 3.2p indicated current support with the 200 Day Moving Average (DMA) scooping up the price action. Holding the 200 DMA would be very bullish and the Relative Strength Index suggests the stock is oversold. There is, however, potential room for a little more downside but an additional army of support is not far behind. If the 200 DMA and 3.2p should give way, the lower line of the upward price channel, as well as additional horizontal support around 2.9p will likely catch its fall. Any drop of this magnitude would send the RSI into very oversold territory, and I would expect it to be short-lived. From a chart perspective, the upside case looks decent with the well-formed price channel heading to 6p and beyond.
