There was a spectacular and surprising fall Getchell Gold Corp. (GTCH: CSE; GGLDF: OTCQB) on Friday when it plunged to close down 33.33%. The company said it was “not aware of any material undisclosed information regarding the company that would explain the recent decline in the market price and level of trading volume of its shares.”
While this may or may not be true, one explanation for this extraordinary drop may be that a large stock holder was hit by a margin call, and in this situation the broker may dump shares without consulting the owner. If that’s what happened, then he’s created an opportunity to buy the stock at a knockdown price at a time when the whole sector looks set to rebound from its recent severe decline.
What usually happens after a drop like this, especially if it happens on a Friday, is that the stock opens again in the next trading session and goes down at the start of the trade, breaking can -temporarily be the support shown on our six-month chart, before reversing quickly and climbing sharply to perhaps near the day, leaving behind a reversal candle such as a “hammer” or a bullish belt” or possibly the star candle of a “morning star reversal”.
Although it’s a bit of a gamble, a good play for the more daring trader is to see how it opens the next session and then quickly intervene if it drops again, even if it might drop for a few days, he is likely to recover before long.
The three-year chart shows how the plunge has brought it back to the lower boundary of the broad trading range that began forming early last year. This chart also shows the origin of the strong support which should once again lead to a reversal to the upside, especially given the now much brighter outlook for the sector. We can also see how the closing of the bullish Falling Wedge pattern shown led to the breakout and strong rally in June.
Conclusion: Getchell Gold is classified as a strong early speculative buy in the next session. Stops are not considered necessary because even if it goes down a bit more, then it should reverse up.
Getchell Gold website
Getchell Gold Corp closed at CA$0.40, $0.325 on July 29, 2022.
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