Two months ago, small cap stock Clearly Canadian (CCBEF) just looked lost. Now it looks like they’ve been found again…at least by a small piece of the investing world. After hitting a peak of $3.25 in 2007, the move to a low of 37 cents in mid-December pretty much took out even the last of the die-hard bulls. Like your mom often said though, it’s always darkest before dawn. CCBEF has pushed its way back up to 75 cents, and left behind a chart most technical analysts would consider very bullish.

Here’s the case…

• Higher highs and higher lows. We’re seeing them for the first time since the first half of 2007. It’s an ugly higher high, and could be argued. However, almost all recoveries start out as questionable.
• The key short-term moving averages have been crossed, and are now pointed higher. Moving averages are incredibly simple technical analysis tools, but that’s why we like them. If they’re pointed higher, the trend obviously has to be bullish. (Who said trend-spotting has to be complicated?)
• Clearly Canadian shares are coming out of a very long-term, very oversold condition. The chart’s itching for a rally.
• The current market cap is about $15 million. Last quarter (a seasonally slow quarter) they drove around $3 million in sales. The last two quarters they’ve done about $4.4 million in revenue. Though not by leaps and bounds, the company is undervalued compared to its peers.

The key to it all as far as traders are concerned - as we see it - is a break above 78 cents…the high from early January and again in early February. If CCBEF can break that ceiling, the ‘higher high’ theory will decidedly become reality. By default, January’s low of 47 cents will become a ‘higher low’.

With all that room to move before the next likely ceiling is reached, our technical analysis leads us to think Clearly Canadian is a high-odds idea worth watching over the next few days. The 200 day average is at $1.80, and the nearest Fibonacci retracement level is at $1.48. Either way, the distance between ‘here and there’ on the chart makes for some big trading potential.

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