WLC.V Western Lithium Canada Weak Technicals – Massive Overhead Resistance Case Study

by Olivier on February 18, 2010

Interesting chart development with WLC.V – Western Lithium Canada. Technical damage is huge and the stock has built up massive overhead resistance. The reason I am stating we are witnessing an ‘interesting chart development’ is not meant to describe a buying opportunity. The exact opposite holds true. A perfect chart example for a case study. You guessed it. I am going to talk about Overhead Resistance. As you might know by now this is the number one performance killer. Assume you have found a sector that you want to get exposure to. You do your due diligence and end up with a few stocks. Your job is to identify the strongest stocks within that sector. The strongest stocks obviously have the strongest charts. Going forward the best performance is usually achieved when you buy into the ones with the least overhead resistance. I am not saying to blindly buy new highs. But if you can find a stock with some kind of consolidation and somewhat decent pattern pressure that is trading near its all time high or its 52 week high, odds are you found a extremely promising candidate with the potential to significantly outperform its peers going forward. You might want to add fundamental analysis to the mix in order to find appropriate candidates. In the end though your buy decision should be solely based on the technicals.

That being said most of the Lithium Mining Stocks are not looking too good right now. The Lithium Sector Overview Chart makes it easy to compare the technicals of some of the Lithium stocks I am watching. WLC.V – Western Lithium is now hitting support but it has trapped all the traders that entered the stock above 2.00 CDN$. Looking at the volume this has the looks of serious distribution and could be blow-off type volume encountered at tops. The stock has now also trapped all those that went bargain hunting around the 1.80 level. The stock has to regain the 1.80 and then the 2.00 level to restore confidence. The terms ‘confidence’ and ‘overhead resistance’ are closely related concepts when it comes to trading. The more overhead resistance a stock has, the less confidence within the shareholder base is to be found. It’s really that simple.

WLC.V Western Lithium Overhead Resistance

Up-to-date WLC.V Western Lithium Canada Chart on my public list.

Right now the two Lithium stocks with the least overhead resistance are RM.V – Rodinia Minerals and PL.V – Pan American Lithium. From a purely technical perspective they should outperform going forward. Let’s see what happens.

Go for stocks that have low overhead resistance.

Have a great evening!

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