New Pacific Metals Corp (CVE:NUX) (PINK:NUXFF) stock squeezed the short sellers by the end of Monday’s trading session, making a 6% gain for the day under the heaviest trading volume of the year.
Strong selling pressure from the last week was carried into Monday’s trading, but eventually ended up only as shadow on the white candle. A similar situation occurred in mid-March this year – a breakdown attempt was followed by a price bounce.
Like the last time, much appreciation shouldn’t be expected- the bounce was not supported by official news, but simply followed the technical situation. Upside is however limited by the fundamental background – the company has recently increased its assets, but still remains in the exploration stage and has no revenues.
The underlying book value is only $28 million, whilst the market cap is over $105 million. A Price/Book ratio of 4 is way too large for a junior mining company with no revenues. The property recently acquired from Tagish Lake Gold Corp. is yet to be explored and the company continues to incur increased expenses related to the property.
The company recently raised $25 million, so at least it has the cash to carry out operations. However, this was done by issuing 18 million shares and diluting shareholders.
The share price has nowhere to move up until the company finds gold/silver on the properties and proves their worth. Short-term consolidation is the most likely scenario from here on with $1.88 and $2.15 working as the support and resistance accordingly. $2.00 level is another strong resistance that’s now in play, but the bouncing stock can easily gather up momentum to pass above it.
