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Liberty Star Uranium & Metals Corp once again traded higher today on increased volume.  The last three days have clearly been a confirmed breakout from the .03 resistance.  Today the stock did show some supply come in during the end of the day and this is evidenced by the medium sized topping tail in today’s price candlestick.

I mentioned yesterday about the ‘three white soldiers’ candlestick pattern and it with today’s bullish candlestick it appears to be a valid pattern.  So what now ?

I think we are getting close to buying climax for the short term.  I am not quite sure if today was it.  We did see the supply come into the stock today near end of day and usually what you will see is an attempt to rally back up to near today’s high which is .069 and then see if the stock has enough energy to power higher.  If it stalls near .069 then we have likely seen the short term top for now and will move into a consolidation pattern that may last several weeks.

The steadily rising volume has supported the recent advance and so clearly the trend is up.  The long term weekly charts also continue to look very good.  Sometimes I have seen penny stocks make a mid range close like we have today and then go higher one more day in a massive blow off power candlestick. It would probably be too speculative for me to predict that right now.

Instead I will just stick with the fact that some supply showed itself into LBSR stock today and the onus on the bulls is to take us higher straight out of the gate tomorrow otherwise we will likely start to consolidate again somewhat similar perhaps to the mid July period.

There is a candlestick pattern known as three white soldiers which basically shows three strong bullish candlesticks in a row with the open of each candlestick into the previous days candlestick.

We don’t quite fit that pattern yet, but there seem to be some similarities.  The last two candlesticks look very similar in that they are full demand candlestick bars with very small bottoming tails if any and also no topping tails either.  This is about as bullish as the doctor can possibly order.

The icing on the cake for LBSR would be for another candlestick tomorrow that looks similar to the last two days.  It would be about as perfect a breakout in any penny stock I have ever seen.

The strength in LBSR seems to indicate that it will travel a bit higher before peaking and then establish a new base at higher levels.

I should mention that the .03 resistance is now strong support.  I should also mention that it is very common for any stock (does not just have to be penny stocks) to retest the breakout area which in this case is .03. In other words, if LBSR were to break down tomorrow and then get a big sell off going it would be perfectly normal for it to travel down to .03 again as a test of support.

In this case I do not believe we will do that because of the unusual indicated strength of recent days.  Instead I think LBSR will just form a higher base and leave .03 in the dust.

A move back down to .03 would however provide a good chance for accumulation again as long as it holds as support.  But again I do not expect us to go anywhere near .03 in the next days.

Clearly at some point LBSR is going to enter into a new consolidation again.  I really cannot predict at what price this may being from.  It could start from .06 or .07 or even higher.  It is just one of those things we have to let the stock tell us what it wants to do.  The signs will be obvious in the form of an intra day reversal or a double top on the intra day basis.

I think we have maybe another 1 or 2 days to go higher with the outside chance we gap up tomorrow in a one day blow off.  It is all about energy build up and release.  These penny stocks are no different than any other stocks.  They build cause, and then breakout, and then start the cycle all over again.

Liberty Star Uranium & Metals Corp LBSR is trading like a blue chip stock lately even though it is a tried and true penny stock.  A couple days ago we indicated that we are going to be providing ongoing coverage of LBSR because we recently gave it the highest rating of 1 here at penny stocks penny stocks.com and because of our confidence in the price structure.

I cannot say for sure whether or not we will provide daily coverage on LBSR but we will make commentary when it is appropriate to do so.  We do technical analysis here but we do realize that the LBSR is also a fundamental one.

Penny mining stocks are unique in that they can move in a leveraged aspect relative to the size or value of what they have in the ground.  Perhaps they are a bit similar to biotech penny stocks in that the stocks trade on the potential and milestones which would eventually lead to a big cash inflow.

These stocks can make extraordinary vertical moves that would in some cases seemingly invalidate the technical analysis.  But it is our view that technical analysis is never really invalidated, but instead sometimes pushed to the limits.  For example, the long term uranium price chart showed us that uranium went into a mega bubble that pushed the relative strength index to seemingly impossible high levels (greater than 90 for a long time).  A typical technical analyst would probably have seen the 90 RSI level and then said it is extremely overbought and cannot go any higher.  Well it did go higher, much much higher into a blow off super spike.

So keep in mind that our technical analysis of LBSR will try to mainly focus on whether or not LBSR is maintaining its trend strength.  But we may be rough around the edges on the daily moves and if/when LBSR goes into a blow off type upside run.

Today’s Technical Analysis of LBSR

The purpose of this post is to look at the near term technical analysis of LBSR on the daily price chart to see what we can observe about the near term picture.

First, before I start to discuss the chart below I do want to apologize for not showing today’s price candlestick at the correct closing value.  It is still 15 minutes before the close and LBSR will probably close near the top of the range today.  So when you look at this chart below keep in mind that the latest price candlestick is at a closing value of .038 .

The daily chart of LBSR is very interesting because if you were to put this chart in front of my face not showing me the stock symbol and not showing me the current price it is trading at, I would probably assume it is just a nasdaq small cap stock with a very nice ascending triangle chart pattern.

The key observation in this chart is clearly the enormous sign of strength moves with the big marubozu candlestick price bar on about 46 million shares.  That candlestick was basically the lighthouse signal that LBSR is ready to start something big.  We must respect the signal that candlestick bar is telling us.  The signal it tells me (especially after trading in a long 1 to 2 year base) is new bull market.

After the mega spike to .03 on very heavy volume LBSR then transitioned into a consolidation which is perfectly normal and to be expected.  I suspect this pattern will repeat itself over the next few weeks, months or even 1 year time frame.  It is the nature of stocks to breathe in and exhale just like people do.  Small cap penny stocks in long term uptrends tend to do spike moves up and then transition into choppy trading ranges building cause for the next move.

Since the consolidation started in early July 2010 there have been a series of key reversal hammer candlesticks that have marked reversals in the short term consolidation phases.

The most recent one was a doji reversal hammer and led to today’s big breakout from this medium size ascending triangle.

The breakout from the ascending triangle looks valid to me today.  It showed wide price spread and zero supply coming into the stock by the end of the trading day.  The candlestick looks somewhat close to a maribozu type candlestick (where the open is equal to the low and the high is equal to the close). 

The closing volume today was about 6.8 million shares.  This is good but it still falls far short of the peak breakout volume of 37 million shares.  But the key today was that we closed higher well above the resistance level and above all the previous swing highs, a bullish sign.

Since the volume was dramatically lower I see at least the possibility that we pull back tomorrow to test the .0338 level or slightly lower before resuming higher.  Sometimes they initiate an early shakeout to test and touch new support.  It is actually quite common.

Finally I want to get to one last important point about today’s chart structure and that is that in terms of the RSI (Relative Strength Index) we have just entered what is known as the bullish power zone for the second time.  This level resides above the 70 level on the RSI portion of the chart above and is an indication that the bull are in control.  In fact they live and breathe up in that level.

So I suspect we will see follow on strength during the rest of this week until price blows itself out and reaches another intermediate term peak.  This peak could coincide with another RSI daily chart reading near the 94 level.  After the next intermediate term peak I would expect price to enter another consolidation to define a new range.

It is guesswork to predict how many days the RSI can stay above the 70 range.  The last time price peaked out in about 4 or 5 days as shown in the chart.

It will be interesting to see the follow through action tomorrow and the volume as well.  There will be pullbacks for sure, but for now the trend is strongly higher from the looks of the chart.

I will have some future technical analysis posts coming on the penny stock LBSR that talk about the weekly chart and the important dynamics that are going on there.