Banro bounds to the top of its Bollinger bands

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Fri, 01/08/2016 - 11:32 am Nicholas Winton, High on the Hog

This morning we revisit Banro Gold Corp (BAA) which we last featured in October of last year. The small gold-producing junior is worth watching for its formidable relative strength. Banro has been among the strongest resource stocks since late December, rising 25%. This move has been all the more impressive when you realize Banro has outperformed the price of gold by a measure of 5 to 1 over the same period.

Stocks with high relative strength often continue to attract attention (and capital) as they rise and consolidate, making Banro an attractive candidate for traders. What's more, on Thursday shares made a nominal break of the 30 cent resistance level, closing at 30.5 cents. That said, there are however a few technical caveats to note.

For one thing, while Banro's recent rise has come during a prolonged period of accumulation, its sharp upturn has come on fairly low volume. (Indeed, in our previous technical review on Banro, we noted Banro also looked promising but needed greater volume to break through resistance). Secondly, Banro finds itself at the upper boundary of its Bollinger bands a region that has held it in check over the past few months. Thirdly, its RSI has risen to above 70 for the first time in 6 months and is approaching overbought conditions - as we seen a number of junior and senior mining ETFs. So shares may need to pause before seeking higher ground. Despite that, I think miners have a number of good weeks of gains still ahead.

Another point worth noting is that small resource stocks tend to perform best when the US broad market is strong. Recently, the US market has suffered a good thumping - however, we are looking for the US market to start moving higher over the next weeks. So we may see small resource stocks and the Venture catch a bid and follow the trend that gold and large cap miners have set in place.

Banro's resistance is at 30 cents and 32 cents (their October high). Support lies at 25 and 28 cents.

This article appeared on INKResearch.com before the market open on January 8, 2016.

 

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