Although caution is an approach which can pay off in spades as far as the smallest of small cap stocks are concerned, it is usually the case that technical and charting indicators will be of aid in terms of narrowing down the window for those attempting to time a potential turnaround. A good case in point currently is Herencia Resources PLC (LON:HER) where we see an extended base in place on the daily chart following the as yet unfilled gap to the downside in September.
That decline came in the wake of the multiple failures at and below the 200 day moving average, then towards 0.5p, and now lying at 0.35p. Indeed, the 200 day line flagged the decline last year, and should be the first port of call in terms of a recovery. This is expected in the wake of extended support points towards the floor of a falling trend channel from September at 0.18p. The idea of a rebound is backed not only by an extended RSI support line from October, but the way that to start the week we saw a breakout through the 50-60 oscillator zone. The assumption to make for the shares now is that at least while there is no end of day close back below the 50 day moving average at 0.21p we should be treated to a journey towards the 200 day line, with the top of the September gap at 0.4p in focus as a 1-2 months target.
