There is a pretty prevalent theme in the world of headlines and press releases right now; junior miners are going to work. Everywhere you turn, there’s a headline about a mining company either expanding on current projects or exploring new regions for precious metals. This increased media exposure led us to dive into the sector, and after sifting through our watchlists and screeners, we ended up with one specific miner; Eskay Mining Corp (TSX-V:ESK).
This pick comes following an announcement from earlier this month that the company completed a National Instrument (NI) 43-101 technical report on its 100% owned Consolidated Eskay project. The release went on to say that the “revised geological model is strongly supported by the underlying data resulting in a substantial increase of potential for expansion of known prospects but also for the discovery of additional mineralized zones.” This potential for expansion paired with the current technical setup for the stock made this stock rise to the top of our watchlist. Before getting into the setup and trading strategy, first a bit of background about the company is a necessity.
Background:
Eskay Mining Corp (TSX-V: ESK) is a TSX Venture Exchange listed company, headquartered in Toronto, Ontario. Eskay is an exploration company focused on the exploration and development of precious and base metals in British Columbia in a highly prolific, poly metallic area known as the Eskay Rift Belt located in the Golden Triangle, 70km northwest of Stewart, BC. The Company currently holds mineral tenures in this area comprised of 177 claims (130,000 acres).
ESK Trading Strategy:
Due to the current technical setup, we like the entry at Tuesday’s open to not miss out on any potential breakout. To get the full picture of this setup, first let’s discuss resistance. Up first, we have the May peak and mental level of $3.00. This served as pretty substantial resistance two months ago and will likely cause some consolidation once the stock reaches that level again. Up next is the 52-week high of $3.14. Should this stock breakout of the intermediate slightly downtrending resistance trendline (shown in blue), we believe that with the current macro uptrend of the stock, we could be heading toward new highs, especially with investors looking for inflation hedges with precious metals. With that said, we have set our price target at $3.75.
As far as support is concerned, it’s relatively plentiful for this stock. Up first we have the 100-day SMA that is currently at $2.37. Following this dynamic support is the July low of $2.22. Last but not least we have the June low of $2.07. Anything after this could indicate a trend reversal, so in order to avoid ruin while also giving this play some breathing room, we have set our stop loss at $1.99 to allow the mental $2.00 level to serve as final support should there be an intraday selloff.
With these risk parameters in place and using Monday’s close of $2.55 as the proxy entry price, this play is shaping up to have +47.06% upside while risking -21.96%. We anticipate this move occurring within the next five to seven months.