Last week I alluded to the way that the best stock market adage is buy in November, sell at the end of February. In fact, buy on Bonfire Night, sell on Valentine’s Day might be the one. That said, to be fair to the stock market, at least with the blue chips we have had a good run. What spoiled the party initially was Silvergate, with the big hit coming from Silicon Valley Bank. Probably, these were two institutions that most of us had never heard of, along with last year’s FTX. But they were all Black Swans.
It is logical to assume that as the current central bank / interest rates induced downturn progresses, there will be more Black Swans emerging. The question is how much pain equities can absorb, and whether events such as SVB can be regarded as isolated incidents, if indeed they are?
Small Caps Lose The 200 Day Line
As far as the small caps area is concerned, things remained tough work. Apart from bears enjoying the pain and occasionally the failures of others, to offset their own failings, there was evidence that once again it is particularly tough to get deals over the line. This was reflected in the FTSE Small Cap index closing below its 200 day moving average at 6,300, for the first time since the start of the year. The fact that it is falling is also not a good look.
Power Metal / Versarien
In terms of events in the small cap space, they were dominated by the departure of two of the most high profile CEOs, Neill Ricketts of Versarien, and Paul Johnson of Power Metal Resources. If nothing else, one has to say that both worked hard at their jobs, something that cannot perhaps be said of all their peers. The other philosophical point is whether investors actually prefer under the radar CEOs, and indeed companies, to those where there is an Elon Musk style evangelism? One wishes the new CEOs of Versarien and Power Metal all the best, in what are clearly challenging times.
As far as the movers this week were concerned, it is perhaps easiest to take the last big one of the week first. In fact, Celadon (CEL) is a company whose site I visited last year, and was extremely impressed with the operations. Ironically, the shares continued to slide until this week. This is perhaps not too surprising. The whole process of delivering cannabis based medicine is not an easy one. As with anything in the pharma area there is massive red tape and bureaucracy, made even worse in this mini sector given the extremely square attitude the authorities have towards cannabis – as opposed to say, alcohol and cigarettes. There are apparently only four stages to Nirvana, there are many more in the medicinal cannabis space. Shares of CEL more than doubled in the second half of last week, without an official announcement. One can only assume that one of the necessary steps to full medicinal cannabis production enlightenment will be delivered by the Man From Del Monte a.k.a. the Home Office, or similar.
Ananda / MRX
The massive share price rise in Celadon on no news was in contrast to the Ananda (ANA) share price performance. One would imagine that the Aquis listed medicinal cannabis company would have been quite chuffed by the announcement it served up: it is to buy MRX for £2m, a company which has developed a proprietary method to formulate cannabis drugs, something which one would imagine could and should be quite a game changer if you are in this mini-sector. Indeed, it can be regarded as something which would give Ananda quite an edge over its competitors. Rather tellingly, the company itself said that the MRX deal sets it up to be able to provide the evidence to the NHS and others of the medical establishment, of the efficacy of cannabis based drugs. Clearly, the NHS did not need such a degree of evidence when it came to COVID vaccines, but we will let that go for now.
It would be churlish not to mention, the other big cannabis riser, Oxford Cannabinoid (OCTP). Here it is interesting that the company has gathered a decent following on financial media, and is doing the interviews to spread the word. The shares had their key chart breakout through 1p this month, although the start of the recovery was back in December, when the 50 day moving average was broken near 0.6p. Now nearly double that price, the shares are looking forward to the phase 1 clinical trials for the company’s neuropathy / IBS candidate. If the dirty work has indeed been done in terms of research costs, the shares could continue driving towards a 1.8p charting target over the next couple of months.
Speaking of charting targets, I have published a couple of Chart Profiles, in order to focus on what appear to be the most high probability technical situations, which combine strong fundamental backing. This week’s was Tertiary Minerals (TYM). This managed to climb even through Friday’s bloodbath. The idea here is that the stock will repeat the autumn flip from 0.1p to 0.3p.
Finally, we come to Kavango (KAV), a brave end of week riser, under the guidance of a blast from my past CEO Ben Turney. The shares were up nearly a third this week, with speculation here regarding drilling news centring around the KSZ and Ditau projects. The most excitement here is regarding what the latter could deliver in terms of it being a significant, economic gold discovery. Last month the shares dipped towards a penny, they could rebound to post October resistance in the 2p zone by the end of next month.
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