A recent burst of activity at Transense Technologies (TRT:AIM) suggests the stock is ready to cast aside last year’s weakness and embark upon a fresh upward run.

In January the shares slid back toward the 5p mark which had called the bottom twice in the preceding two years. A surge in dealing volumes was suggestive of a selling climax and Transense has since motored higher. The key moving averages have crossed positively and the shares have traced out a bull flag pattern that targets last May’s peak at 14p.

The next stops would be May 2009's summit at 20p and then 37p, sites of both a trading range width extension and the 23.6% retracement of the crunching 2007-to-2008 fall. The 38.2% Fibonacci level sits at 56.5p and the 50% threshold at 74p, very close to a zone of support and resistance that influences all the way back to mid-2003.

From an Elliott Wave perspective, the rise recorded between mid-2011 to mid-2012 rise was an impulse, wave-one move. The decline through to January can be classified as wave two. This implies Transense is in the early stages of the third impulse wave, which usually generates the greatest gains. Only an unexpected slip below 7.5p would challenge the bullish outlook.

1. Bull flag develops from February

2. Jump in volume as shares rally after January's retest of support at 5p

3. Moving averages cross

BUY 10.5p

TARGET 36p

STOP LOSS 7p

Market value: £28.8 million

Prospective PE 2014: n/a

Prospective PE 2015: 10.0

1-month performance: 17.4%

12-month performance: 26.6%

Dividend yield 2014: n/a