Shares digital

Some of the most dynamic companies are to be found listed on the UK’s Aim market. Of course the less demanding listing requirements do attract minnow companies whose shares have very low market capitalisation and as such can often be illiquid situations that are difficult to successfully trade. This is not always the case and a quick glance at a price chart will give you a pretty good idea as to whether a share is worth trading or not from this standpoint. This week we take a look at three diverse stocks that nevertheless are showing signs that gains could well be in the offing.

Domino's Pizza (DOM:AIM)

The UK seems to have an inexhaustible appetite for the fare that Domino’s make and the long term up trend in the shares until last summer reflected just this with the shares locked into a bullish channel. However, after moving to a close test of the channel top, the expected correction developed into a move that saw the channel base broken and a return to test support from congestion close to 140p that last influenced during the spring and summer of 2006. The fall amounted to a halving of the share price, however, the combination of support and bullish momentum divergence subsequently generated a sharp bounce that has seen the shares move to test resistance from their 200-day average. In doing so an inverse head and shoulders pattern has developed and last week’s move above its neckline at 226p suggests that decent gains are likely to follow. The pattern has a derived target move of some 94 pence which would take the shares to 320p and a new high.

BUY at 222p • Stop Loss 197p Target 320p

Healthcare Locums (HLO:AIM)

Last year saw the shares of this health worker provider really take off, more than doubling between April and September and achieving a high of 110p. Perhaps inevitably this rate of increase is difficult to sustain in the longer term and the shares have subsequently softened to 80p, just slightly exceeding a 50% retracement of the previous up move. Support at this level seems to be holding, helped by clear positive momentum divergence. As a result the bear trend line, drawn off the high of last November and which has capped the upside since, has now been broken and resistance from the shares’ 50-day average is presently being tested. While the cautious might prefer to await a move and close above the last minor peak at 85p, given the shares ability to move rapidly and the relative closeness of an obvious level for a protective stop, it might well be time to climb aboard once more.

BUY at 84.5p • Stop Loss 79p • Target 110p

Uruguay Mineral Exploration (UGY:AIM)

When you look at the chart of Uruguay’s leading gold producer and general mineral prospector, two clear features are immediately apparent. Firstly the long decline that saw the shares more than halve in value from their high of 305p, seen in early 2006 and which saw the shares down eventually to a low of 128p, has given way to a saucering bottom formation. Since the low, however, a clear bull channel has formed with current price action appearing to be rising once more from the base line. Also easily seen is strong resistance at 188p which has capped up moves over the last twelve months. This time though, if the price once more moves to test the channel upper resistance line then it will need to break above 188p and that would complete what could be interpreted as a complex inverse head and shoulders formation that targets a move to 246p.

BUY at 167p • Stop Loss 153p • Target 246p