Adira Energy Ltd (CVE:ADL) (PINK:ADENF) is seeing profit taking after the company’s share price didn’t manage to break an important resistance despite strong news.
ADL shot higher after the company announced new resource estimates for their Gabriella License and Yitzhak License. The best estimate suggests 232.2 million barrels of oil and 1.8 TCF of gas present. Only 110.1 million barrels of oil and 110.1 BFC of gas are named as contingent resources, the rest of the estimate includes prospective category, which is basically only speculations.
The stock price jumped up 75% from the pre-news level, but still didn’t manage to break resistance at 30 cents per share. Profit taking is driving the price down today as bulls feel disappointed and try to secure their gains.
The large trading volume for the day still doesn’t mean the price will continue to downtrend from here on. The news was pretty strong and should hold at least part of the gains. In case of a serious correction there is support at 25 cents per share.
Adira currently holds a market cap of $27 million, which is 2.5 times their book value. Since the news didn’t mean an instant improvement in the fundamental situation such a valuation looks slightly overhead for a business with limited revenues.
