China Green Forms First Base Over $10

• Paul Whitfield
• On 6:11 pm EDT, Monday October 26, 2009

Fertilizer producer and distributor China Green Agriculture (AMEX:CGA - News) has been shaping a base since August.

It's the first base the microcap stock has formed above the $10 level.

China Green cleared a low-priced base in July and surged about 70% in three weeks. A low-priced base, however, is generally not considered actionable, especially since the stock was trading less than 400,000 shares daily.

After peaking in mid-August, China Green began forming the current cup base.

The base shows a net two weeks of accumulation. Volume has picked up. It's now trading about 750,000 shares daily, which takes it out of the thin category.

It also has shown four rather tight weekly closes on the left side of the base and two on the right side.

Tight weekly closes are a positive sign, suggesting institutional support.

There are, however, a couple of glitches in the chart.

For the past two weeks, it's been forming what looks like a handle. Volume in the handle is heavy, although it has trended downward the past four sessions.

Normally, it's best when volume is quiet within a handle.

The potential buy point 14 the handle is 14.54.

Another factor to consider is China Green's Relative Price Strength line. It's been in a general downtrend since mid-August.

Here again, it's best if a stock's RS line is rising, particularly before a breakout. That, of course, still could happen.

The Accumulation/Distribution Rating is a B-, which points to more buying than selling.

More mutual fund and hedge fund support, however, would be welcome. In the most recent quarter, there were 42 global funds holding 2.6 million shares, up from 1.4 million shares.

Buzz up!