Chart of the Day: The prospect of Buru Energy (ASX:BRU) filling this gap is… ~20pc
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Like most energy juniors Buru Energy (ASX:BRU) is no stranger to volatility, and indeed if you know it from the 2011-12 run you may have fond memories of the name.
Fast forward to 2021 and they are again drilling a new prospect, and the price action as seen in the chart below speaks to the idea that the market is paying attention.
A clear uptrend since October last year, the moves can be abrupt and prone to decent pullbacks, and the recent conclusion of a capital raise and associated SPP sets the stage for the name to trade on its own merits for the next few months.
Speaking of which, the short-term target of 19.5c comes with the gap left on the chart from the price action in April.
The uptrend suggests that has a reasonable chance to fill.
As far as supports are concerned the 200-day exponential moving average in light blue provided perfect support at 13.5c on May 10.
A move above the 50-day average in green brings that 19.5c into focus, and beyond that a potential re-test of 22.5c.
Trading the sequence of news items that comes with the drilling of a well can be a tricky business, and as such positions should be sized according to one’s tolerance for meaningful risk.
There is no compulsion however to be there on the day the ultimate news arrives, and so in this case we are looking for expectation to be our friend whilst letting the price action guide our involvement.
That means we are buyers at 16c, risking to 13.5c, and have a first target of 19.5c in coming weeks.
The macro-backdrop is felt to favour energy more broadly also, as supply side constraints may be currently under-estimated relative to global demand as re-opening continues.
Steve Collette of Collette Capital Pty Ltd (ABN 56645766507) is a Corporate Authorised Representative (No. 1284431) of Sanlam Private Wealth (AFS License No. 337927), which only provides general advice.
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