One of the je ne sais quoi aspects of the stock market is sentiment, something we have been reminded of with the Silicon Valley Bank debacle. Indeed, it may be said that the negative hysteria reached its peak to start the week, so much so that a rebound in stocks, however temporary, is overdue.
Oversold RSI
Technical analysts use indicators such as the Relative Strength Index (RSI) to gauge when a stock is oversold or overbought. However, it is the mix of a very oversold stock and negative sentiment that can provide the best positive turning points. In the case of Reabold Resources we were treated to a rebound from very oversold levels in December 2021, when the shares were near the 0.1p level. At the time the RSI was under 20 – well under the 30 traditional oversold measure. Of course, it can be seen from that low point the shares more than quadrupled to 0.45p within 3 months.
Potential Rally Point
Fast forward to March 2023, and the shares are also sporting a RSI below 20, with the shares down from their 2022 peak of 0.5p, 6 months ago. On a technical basis one would look to see RBD rebound in a similar manner than to 15 months ago. In fact, RBD rallied from a similar technical point in March 2020, when the shares were 0.23p at their lowest. They peaked at 0.7p by the beginning of June. It is interesting that over the past few years we have seen the shares bound either side of 0.2p at two key times, this could be the third.
Finncap 1.2p Target
Of course, there is more to Reabold than just the charting picture, as we have been reminded of in the form of Finncap’s risked NAV target of 1.2p. This is based on the potential of West Newton. But it could be argued that West Newton aside, the sale of Corallian to Shell for £12.7m last year means that there is no basis for the share price to be anywhere near where it was before the deal was struck. Ironically, Reabold’s share price would also be far higher than where it is now if its (much larger stake in the asset) was valued by the market at the same rating as at partner Union Jack (UJO). So, for fans of West Newton the current cheaper entry point is at RBD, particularly on the basis of the oversold technicals of the price action, as well as the sentiment towards the company. In addition, the last time Reabold shares were at current levels the potential of West Newton and H2 2023 for the first horizontal well not so imminent, or Finncap’s 0.8p a share valuation for the project alone, not in the mix.
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