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This article is for GoldStockMania.com reader JT and many others inquiring about Petaquilla Mineral’s (PTQ, PTQMF) recent share price decline. In this article, I hope to determine a reasonable expectation of where Petaquilla’s share price may bottom out, how low it can drop before we should be concerned about it, and more importantly when we can expect a turnaround. I did a fundamental analysis on Petaquilla Minerals in my PTQ Junior Mining Stock Trading Card. This article compliments that one with a technical analysis.

Please understand that I am not a charting expert, although I have been known to do a few charts in my day. Also, understand that charting is not an exact science and is correct about 60% of the time. Your mileage may vary based on whose doing the chart analysis.

This is my attempt to gain some additional insights on what we can expect from Petaquilla’s future share price movements. I am sure there are plenty of Chartist out there like Clive Maund at CliveMaund.com or Adam Brochert at Gold Versus Paper and others that could do a much better job than my crude analysis that follows. Clive has covered PTQ previously in his newsletter.

You can make charts like the following over at StockCharts.com for free or with a paid subscription. I just used their free basic service to create the chart below. Obviously you can make a chart as simple or complicated as you like. In this case I tried to keep the number of indicators to a minimum.

When can we expect all the selling to stop?

To answer this question we need to look at a couple of things. A good place to start is at the top of the chart with the Relative Strength Indicator (RSI). The RSI is typically used as a momentum indicator and has a scale range of 0 to 100. The two numbers to be mindful of with this scale are: 30 and 70.  A stock is considered overbought when the RSI is greater than 70 and is considered oversold when the RSI is less than 30. The RSI helps you know when the buying or selling momentum is reaching a climax.

A stock does not have to go over or below those thresholds to be considered overbought or oversold. It t is common for stocks to hit near the 70 threshold and reverse or hit the bottom 30 threshold and reverse. The first blue arrow (left most), points to the spot that PTQ did exactly this. The RSI hit near 30 around November 2009 indicating that the selling momentum was exhausted. The RSI bottom also coincided with PTQ’s share price bottom at that time of about US $0.20 cents or so.

After the RSI and share price bottomed in Nov. 2009, PTQ’s share price and RSI reversed and went up nicely until an RSI top near 70 was reached around Dec 2009/Jan. 2010. At this point, the RSI indicated that the buying momentum was pretty much exhausted. This also coincided with a top in the share price (red arrow 1/2010) as PTQ’s shares started their current decent.

Currently, the RSI is indicating that the selling pressure might be exhausted as it seems to have bottomed and started to turn up!  So we can probably expect the share price to start stabilizing pretty shortly and subsequently begin to rise.

How low can we expect Petaquilla’s share price to go?

To address this question we need to look at the bottom of the chart. Specifically there is a green line running across the bottom of the chart with 3 green arrows pointing up. This green line shows where the support for the share price is. This is important as it indicates how low the stock can fall before you should be concerned about it.

This green line of support is very near the US $0.25 cent range. It was first tested at the end of 2008 as shown by the left most green arrow. The support line was tested again at the end of 2009 as shown by the second green arrow. The third green arrow on the far right shows where we are now.

PTQ has not tested the green line of support as of yet. Not to say that it won’t, because it may. If the RSI turns up from here, which it looks like it is, then we probably will not see PTQs share price touch the support line. I would be concerned if PTQ’s share price closes below the support line.

When can we expect Petaquilla’s share price to turnaround?

To address timing, let’s look at the RSI and the most recent tops and bottoms in the share price. From what I can tell, a reversal is imminent.  We already know that the RSI looks like it may have bottomed and might be already reversing.

Looking at the left most red arrow (July 2009) and following the downward trend to the next red arrow (Nov 2009), took about 5-6 months before reversing. Also the current downward trend that peaked around Dec 2009, has been declining now for almost six months. If the pattern is repeating, then a reversal could be very close.

A break and close above the black trend line would signal a buying opportunity as the reversal would have commenced. Also the downward black trend line and the green support line appears to be forming a pennant formation which is considered to be bullish by Chartist. Typically a stock will breakout near the apex of a pennant formation.

Summary

My charting analysis indicates that we may be near the bottom and can probably expect a share price reversal in the very near future. The share price appears to be well supported at US $ 0.25 cents. A close below this price should be a cause for concern. Personally, I think the share price should stabilize in the .29-.35 cent range.

When the debt restructuring deal is completed and announced, that could be the news to cause PTQ’s share price to explode and thus break out of the current pennant formation.

I hope this information helps many of the PTQ investors out there stand their ground and collect nice profits in the near future. Always remember that nothing is guaranteed and risk is a part of every trade.

What are your thoughts on this? Do we have any Chartist out there?

Related Posts:

• What to Expect for Gold & Silver This Week 3/21/2010
• Petaquilla Minerals Financing Update
• Petaquilla Minerals Update 7-26-2010
• Petaquilla Minerals Update 9-20-10
• Petaquilla Minerals Update 6/02/2010

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Disclosure: I have not received any compensation from Revett Minerals, Timmins Gold, Metanor, or Petaquilla Minerals. None of these companies are advertisers on GoldStockMania.com. I am extremely bullish on Petaquilla, Timmins Gold, & Metanor and currently hold shares.

Disclaimer: I am not a professional/qualified investment advisor. Readers should note I am not responsible for errors or omissions in this report. Also, I am not responsible for your trading decisions as you should do your own due diligence before making any investment decisions.