Turquoise Hill Resources Ltd (NYSE:TRQ) Shows Initial Signs Of Strength

Denver, CO, 08/05/2013 (Avauncer.com) – Turquoise Hill Resources Ltd (NYSE:TRQ) (Closed: $4.80, Up: 7.62%) rallied hard for the third straight session and recovered nearly all of its loss made in the first two days of the week. On Monday it had crashed by about 20% and on Tuesday by another 10%. The interesting thing was that though the daily range was much smaller on Tuesday, the volume jumped. It bottomed out on Wednesday on very light volume and rallied about 35% from the low on great volume for the next two days. Volume at 18.5 million on Friday was the highest in last one year, against an average of 2.5 million. The weekly volume was the highest in the last two years. This explosion in volume in the lower levels with the price not sustaining at the lows generally implies accumulation. But the price must confirm it by rising further.

The long term chart of this stock shows a picture perfect Head & Shoulders top – an ideal reversal pattern with a clean break of the neckline without any kind of whipsaw and achieving its target without any fuss. It just doesn’t come better than this. The long term top was made in December 2010 at $30.03 and the next major swing low was made at $12.11 in October 2011, a fall of about 18 points. The next major drop from the November 2011 top of $23.08 took the price to $3.82 by July 2013, about 19 points. This near equality brings a possibility of the bears taking a pause for a while.

The indicators are showing a hint of positive divergence in the weekly time frame but the same sign of strength is still missing in the daily charts. There is a Double Bottom seen in the daily RSI, but the price needs to sustain above its last swing high of $5.34 for further bullishness. If it can hold the low of $3.82 in the next few days, that would be a great boost for the bulls.