The share price of Jangada Mines (LSE:JAN) is still languishing well below its recent placing price of 3p. With the stock now at 2.4p I suspect there are a couple of contributing factors.
Firstly, 1-for-1 warrants were issued in the fundraise, with an exercise price of 6p. It’s not uncommon for some investors to participate in a placing with a view to bagging a ‘free ride’ with risk-free warrants. In such cases, some investors may have opted to sell the stock at breakeven, or even at a slight loss. Add in a second factor, the current macro climate which spooked markets last week and you have a perfect storm weighing on the share price.
Having broken an area of support I thought might hold prior to last week’s market wobble, Jangada is now approaching another area that could prove to be supportive for a bounce. With the company only listing in July 2017, there’s not a huge amount to go on, but the trend channel since its inception bottom’s out at around 2.27p (thin red line).
The share price has already hit a more generous line (thick red) of support drawn from the closing lows of Autumn last year. The most compelling argument that the stock is reaching sell-off capitulation is the extremely tight coiling of the Relative Strength Index (RSI). At some point soon the RSI will breakout from the wedge, and with the stock already very oversold, I believe upwards is odds-on favourite.
