MEY getting ready for a move - but which way?

The recent break providing a buy signal seems to have been a false break. That false break to the upside follows a false break to the downside. Two or three false breaks in a row are usually followed by a strong move. The question is which way will the strong move go? Today my proprietary indicator turned red so don't be surprised to see a move down now. Currently, my indicator will not turn blue again until the price trades above 10.5 cents. Here's today's chart.



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Trendline proving too powerful

The downsloping trendline connecting the March 2010 and November 2010 highs is proving too strong for the price to break through.



There's a trendline in the way

MEY is on the cusp of breaking out but a bunch of shares at 10.5 cents is keeping the lid on further advances. The price of 10.5 happens to correspond with a trendline starting from the March 2010 high. Will this trendline hold the advance? On 18 October 2010, the price gapped through the first trendline connecting the March '10 high to the May '10 high. The price then neatly 'hugged' the top of that trendline for the next two months until finally and seeminly reluctantly, closing the gap. Then somewhat sluggishly, it started on its current advance. That advance is now gathering pace. If and when it does cleanly break through 10.5, expect the price to reach at least 18 cents.

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MEY gives a buy signal

Marenica Energy Limited (MEY, formerly West Australian Metals Limited) is an exploration company focusing on the discovery and development of uranium deposits. MEY’s principal project is Marenica Uranium Project in Southern Africa. I have never owned shares in MEY but I bought some today - for three reasons. First, the XAO Indicator is blue so it is a good time to be long stocks. Secondly, MEY is in the uranium business, commercially uranium miners seem to have a very bright future. Many see uranium (to create nuclear reactors to provide energy) as the answer to the greenhouse problem which accounts for current bullishness on the price of uranium and uranium miners generally. Environmentalists are negative on uranium for several reasons which I won't go into here. Suffice to say that regulations are strict and controls on disposal of waste very stringent. The third reason for going long today is the buy arrow on my trading system. (Disclosure: I own shares in MEY).
Click on chart to enlarge.