Tech Talk: A Couple of Cups

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence. 

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Just about everyone’s favourite chart pattern is the Cup and handle formation, which you can see above with a vengeance.

The company behind this particular example is Calgary-based Yangarra Resources (YGRAF) – a junior oil and gas company with operations focused on the Cardium – a large, and well-explored geological play – in central Alberta.

After the market closed on August 10, the company reported second-quarter financial results. Production averaged 2,849 barrels of oil equivalent per day, and management said they plan to resume drilling activity, using six “extended reach” wells in the offing. During the last year of horrible oil prices, the company suspended drilling entirely.  Now, it also plans to frack a well into the Duvernay tight oil formation. It can do these things because the company recently raised $11.5-million though the sale of 11.5-million shares at $1 per share.

This “bought deal” suggests confidence in company management. It also suggests that confidence in oil prices which, to many people in the oil-producing regions of the world, may come as a surprise. 

However, the following XLE, which tracks the Energy Spider on the New York Exchange, is an echo of the same pattern. You don’t need a lot of imagination to see a similar formation in this chart, too.

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Both chartsdisplay a golden cross – the pattern formed when the blue 50-day moving average goes up through the red 200-day moving average. The XLE does not display a clear breakout, as Yangarra does. However, that may come soon.

Yangarra is a small company. That means smaller volumes of trade could have a big impact on its price – up, but also down. I was sufficiently enthusiastic about its cup and handle that I picked some up. Of course, I don’t have the credentials or the license to recommend that you do the same.