NEW!! Check out our new junior oil stock pick. Uranium and gold juniors have been breaking out.
Depression Beater Portfolio: - see below for new updates on Junior Miner Favorites - (This portfolio is just a sample of my own portfolio - no recommendation to others is implied or intended)
1/26/12 (Commentary for Thursday) The ES is pulling back in a 3-wave corrective pattern to test the Volume Point of Control on the hourly chart – holding 1308 over night should be bullish in the morning – breaking down through 1308 will tell us a deeper correction is unfolding. The decline today was met with substantial put buying. Our most reliable sign of a short-term top in this liquidity driven market is an extreme TRIN5 reading (<4.00) – today's reading was 5.94. The fact that the HUI finished a Wave 2 decline on the hourly chart Wednesday morning The HUI confirmed a MAJOR LOW Tuesday morning - the cluster of a 13-month and 34-month Fibonacci step out converging into today. Gold made a Projected Weekly Low Wednesday and then reversed up with a vengeance – buy on 3-wave corrective declines on the 5-min chart. The ES and PMs continue to climb a wall of worry in an economic backdrop that should be equity bullish until midyear – tech earnings and guidance minimize the chance of a recession until Q4 in our opinion. The fact that the HUI confirmed a major low this morning argues that any broad market correction will be brief. Gold clearly made an important low 12/29 at $1525 in the 12/29-12/30 turning point window and reversed to the upside with a 5-wave impulsive rally that may have finished on the on the hourly chart. The GLD gave us a capitulation volume on 12/29– we're looking for a bounce to the top of the daily range – buy gold, silver and gold stocks on dips. The HUI may have finished an EW double zig-zag corrective pattern on the weekly chart – multi-year lows in bullish sentiment on the whisperumber.com poll argue that a Major Buy Point for gold stocks is at hand.
- Big Picture on Stocks (Updated) – We believe that the ES is rallying in a B-wave to test the 2011 highs – the alternate count is also short-term bullish – that we finished a 4th wave on 10/4 and have started a 5th wave up to new nominal highs. A rally to the 2/10 turn window is expected in the short term.
- Big Picture on PMs (Updated) – The daily chart of gold appears to have finished the Wave C of a large EW a-b-c corrective pattern from the September high on 12/29. Gold made a major low today at $1525 as the 12-wk cycle low bottomed in the 12/29-12/30 turn window – buy the PMs on dips. We're looking for a short-term peak on the New Moon on 1/22 use a brief pull back to add to longs.
- Stocks – The ES declined in a 3-wave pullback on the 5-min – looking for the market to bottom and reverse up by Friday morning.
- Gold – Gold rallied in 5-waves off the Wednesday morning low – a 3-wave corrective pull back into Friday should be reversed up.
- Silver – Silver broke out to the upside impulsively – look to buy brief, 3-wave declines on the 5-min chart. Looks very bullish into 2/10.
- Bonds – The bonds are trading very weak – the early rally Wednesday was reversed down. A major break down into the spring is possible. Adding to TBT leap calls.
- Crude oil – As long as oil holds above $98.83, the bullish inverse H&S pattern on the daily argues for a break out to the upside. If the seasonal low in February holds above $98.83 that will put this market in a bullish light. Iranian tensions and a rolling supply shock from the 2008-2009 wash out should give us another price spike above $120 going into the first half of 2012 but we may get a typical seasonal low into February first.
- Dollar index – The hourly DX rolled over into another impulse leg down – should see lower prices into February. Our target of .90 appears to be farther off in time – perhaps in Q2 of 2012 as the next stage of the European debt crisis rears its head.
TURNING POINT DAY:
The New Moon on 1/23 and the 1/22-1/23 should dominate trading this week – the New Moon held up the indices into late Friday expiration trading and may give us a lift early Monday. We are looking for an important low in the HUI going into 1/23.
Depression Beater Portfolio: (This portfolio this week is just a sample of my own portfolio - no recommendation to others is implied or intended)
WEEKLY COMMENTS: The uranium sector (UEC, STM.TO are breaking out from a depressed level – buy these stocks on dips). The gold juniors (EVG.TO ad GYPH should play catch up with gold this year). Coal stocks have been really beaten down but PRPCF is a special situation stock that is trading at a substantial discount to core assets – buy on dips.
- NEW PICK - Aroway Energy (ARW.V, C$0.90 -.02) – This western Canadian junior is part of a very sweet JV deal with a private partner in the Peace River basin – it's production share should climb from 669 BOE/day (75% black oil) to over 1000 BOE/day later in 2012 – management has selected a good slate of properties for drilling and it is bearing fruit. Buy on dips. Use a 20% stop from purchase price.
- Evolving Gold (EVG.TO, C$0.325 -.005) – The stock price fell back to the level of the recent private placement – drill results coming out soon could confirm a world-class find in the Carlin trend – this stock is a buy here. But a world-class deposit in Wyoming (Rattlesnake) and a potentially huge find on the Carlin Trend in NV argue that this stock will be a big winner. Goldcorp took a 15% interest and that says it all.
- Uranium Energy (UEC, $4.05 +.01) – The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.425 -.01) – Very undervalued uranium stock with huge reserves (+100 M lbs of relatively high grade), lots of cash and production prospects by 2013.
- Prophecy Coal (PRPCF, $0.428 -.003) the spinoff of the Prophecy Platinum Company (PNIKF) has made this stock a potential takeover candidate. John Lee is determined to drive this emerging coal producer in Mongolia into an international mining powerhouse. Very aggressive business plan in place to make it a billion dollar company. Following the path that Robert Friedland took with South Gobi. This stock has obvious 10-20 bagger potential.
- Gryphon Gold (GYPH, $.2497 +.0129) - Got plan from management to begin phased production by early 2011 - financing details have yet to be announced. Has >1M oz AU proven, mining permits and a highly prospective land package. Needs a cash infusion and maybe a partner. Good leverage to gold.
JUNIOR MINING FAVORITES:
(These companies are speculative - best to keep them to 10% of a portfolio with 50% stops based on purchase price. Buy a basket to diversify risk)
RULES FOR JUNIOR MINING INVESTING:
1) Keep to 10% of a portfolio.
2) Due your own Due Diligence.
3) Maintain a price stop of 30% of purchase price or whatever your Technical Analysis suggests is prudent.
4) Sell half of position on a double.
5) In this speculative environment with many junior miners coming to life, put a TIME stop on your junior investment. If your position is DEAD MONEY, consider rotating it to a stock that has more favorable technicals - juniors should have a PERFECT STORM behind their back between now and April 2011 - it's a time to MAKE HAY.
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