Largo Resources Ltd. (CVE:LGO) (PINK:LGORF) continues to skyrocket after breaking through the resistance at 38 cents on no news announced.Extensive volume on Tuesday of over 6.5 million was more than 4 times the 50-day average and provides for a perspective of further buying pressure. The preceding uptrend, however, was appended with a gap in the price that could lead to exhaustion.
The key news behind the initial price rally was the positive preliminary economic assessment results on the Currais Novos Tungsten project, followed by an update of a LOI with Vinci Capital Gestora de Recursos Ltda. Largo expects that the definitive agreement could be reached by the end of January, 2011.[BANNER]
The management is playing safe – a $162 million loan facility was secured for the Maracas Vanadium Project in Brazil and a nearly $5 million equity financing was closed in September. However, the company currently has no revenues, thus a significant part of the market value comes from the stated potential of their projects. Though, that potential is yet to be utilized.
The market cap is already twice the net tangible worth of the business, and it could be difficult to find more space for appreciation. The gap and a shooting star candle at the top suggest a possible correction underway. Significant trading volume and converging MACD movement do not support this idea though, thus confirmation for any direction is required at this point.
