BullMarketRun.com

CDNX And Gold

The CDNX lost 14 points this past week, dropping from 1681 to 1667, but this market is still in a very bullish state and any pullbacks should be embraced as buying opportunities as we saw Tuesday and again Friday.

The current bullishness of the CDNX was clearly in evidence Friday:  Gold plunged by more than $20 an ounce and the Dow and the TSX were both off sharply, more than 100 points.  Intra-day, the CDNX lost 33 points and fell to 1650 which seems to be a new support level.  Immediately after touching 1650, buyers stepped into the market and drove the Index back up on strong volume to close at 1667 – just a 13-point drop on the day and less in percentage terms than the drop in gold or the major markets.  Conclusion:  Nothing changed Friday in terms of gold’s primary trend.  As unsettling as these pullbacks can sometimes be, they have consistently proven to be buying opportunities.  We’ve made a lot of money in recent months buying into these dips and recognizing that the primary trend with the Venture, precious metals and commodities in general is up.

Gold’s drop Friday caught some investors by surprise – it wasn’t something we were expecting either.  But gold’s 14, 30 and 60-day moving averages, which recently reversed to the upside, continue to rise which should give strong support to this market above $1,130.  This single day sell-off was probably healthy from a technical standpoint and we should see a renewed advance from here.  The action in the CDNX Friday confirms that view, and even the TSX Gold Index posted just a modest 4-point drop Friday.

The BullMarketRun Portfolio

Gold Bullion Development (GBB, TSX-V)

Gold Bullion showed tremendous resilience Friday and refused to fall below 30 cents…the stock firmed up over the final half of the trading day and closed the week at 33 cents, a 5 cent jump from the previous Friday…an exploration update on Granada, including a Preliminary Resource Block Model, is expected sometime next week…it’s our view that the potential of Granada as a major bulk tonnage, open-pit deposit will really start to come into focus for investors when Gold Bullion releases its model – we’ve reviewed all the historical information on Granada, we spent three days on the property in March, and everyone has seen the results on Discovery Hole #17 in the NE…our research and our “gut instincts” tell us Granada is going to develop into a multi-million ounce deposit – yes, in the neighborhood of at least 5 million ounces – after more drilling which commences next month…it doesn’t take a rocket scientist to figure out the valuation this stock could have if that much gold is shown to exist at Granada…we consider, therefore, the current $34 million market cap to be a bargain…the gold at Granada is near-surface, there are no issues with the ore and recoveries have proven to be very high…the deposit is surrounded by excellent infrastructure and is located in what is considered to be the best jurisdiction in the world for mining and exploration…a much higher valuation for Gold Bullion can easily be justified if the market begins to assume, as we are, that the company is on its way to defining a multi-million ounce gold deposit…the other advantage investors have here is that this story is only going to get more interesting as there will essentially be no “dead time” between the exploration update expected next week and the start of major new drilling at Granada which is imminent…this is a story with intrigue and some serious legs…the news flow is going to be intense, so interest in this stock and this company is only going to build…as an investor, that’s the kind of situation you want to have exposure to…holding a core position that you don’t touch for at least six months makes a lot of sense with Gold Bullion…

Seafield Resources (SFF, TSX-V)

We had a very enjoyable long chat Friday night with Seafield President/CEO Tony Roodenburg and we encourage readers to listen to the 15-minute or so interview we posted with Roodenburg on the site Saturday…Seafield had a bit of a rough week and fell as low as 23 cents before closing Friday at 25 cents, a 3-cent drop from the previous Friday…the fundamentals are very much intact with this company and the share price weakness we saw this past week was do entirely, we believe, to the 5.8 million 12.5 cent shares from December’s financing that became free trading last Monday…now is clearly the time to be accumulating Seafield for the next major move up which we expect will really start to kick in by sometime in May, if not sooner…the company has already started exploration work at its Quinchia district properties in Colombia and drilling should commence within 4-6 weeks at Dos Quebradas…the late spring and summer are going to be extremely busy for Seafield in Colombia and we believe the stock will perform very well as a result…most of the cheap private placement stock from last year has been soaked up by the market…that “overhang” pressure will soon disappear, paving the way for another bullish move in the share price…the company is well financed and from a technical perspective, the stock has extremely strong support at current levels just above its 100-day rising moving average…the risk-reward ratio with Seafield right now is highly attractive…

Kent Exploration (KEX, TSX-V)

Smart money continues to accumulate large blocks of Kent in advance of the upcoming spinoff when Kent’s Gnaweeda Gold Project in Western Australia is vended into Archean Star Resources…the new company, which is being financed around 25 cents, is expected to start trading on the TSX Venture Exchange within a week or 2 after shareholder approval of the spinoff is granted at Kent’s AGM April 30th…Kent shareholders as of that date will receive 1 share in Archean Star for every 4 shares of Kent they own…still under some warrant pressure, Kent closed Friday at 18.5 cents, a 3.5 cent drop for the week…not only are we very bullish on the prospects for Archean Star, as explained on this site many times, but we expect Kent’s two remaining flagship properties – the Alexander River Gold Project in New Zealand and the Flagstaff Barite Property in northeast Washington State – to propel Kent higher after the spinoff…in otherwords, we don’t accept the argument that Kent’s value will decline with Gnaweeda taken out of its property potfolio…

Sidon International Resources (SD, TSX-V)

We haven’t said much about Sidon lately as we’ve been very busy with developments in other situations…we’re also content to see BMR readers continue to accumulate around current levels…this stock’s time will come soon enough…Sidon closed at 5 cents Friday, a 1 cent loss on the week…the company has signed a letter of intent to acquire an option to purchase an 80% interest in the Morogoro East Gold Property in eastern Tanzania…this is a high grade prospect and a property of considerable merit in an under-explored region…the stock has great liquidity and the current market cap is only $4 million…this situation reminds us a lot of Seafield and where it was just under a year ago…Sidon has great potential to develop into a huge winner for BMR readers….

Richfield Ventures (RVC, TSX-V)

Richfield has started a 25,000 metre drill program at its Blackwater Gold Project in central British Columbia, a program that will lead to a 43-101 by early next year…like Gold Bullion’s Granada, we believe Blackwater has excellent potential to develop into a world class bulk tonnage deposit…the stock has backed off from its March high of $2.25 and closed Friday at $1.89, a 6 cent loss for the week…Richfield’s 20-day moving average has surprisingly started to decline for the first time in 2 months which we’re not overly concerned about as all of its other moving averages are in bullish alignment…however, a near-term test of its rising 50-day moving average at $1.65 has to be considered a possibility and some stink bids around that area would probably be a smart idea…December’s 7 million share private placement between $1 and $1.20 became free trading this past week but we don’t consider that to be a major overhang issue…

Colombian Mines Corporation (CMJ, TSX-V)

The first 3 holes from CMJ’s Yarmualito drill program are currently in the lab and assays are expected within the next 10 days…regardless of those results, we’re very bullish on the prospects for this company which has such a large and attractive portfolio of properties in Colombia…from a technical standpoint, CMJ is clearly a buy right now – it’s sitting right at its 50-day rising moving average where it has traded at or above for the last 7 months since its spectacular run began…below that, there’s huge support at the 100-day SMA of $1…the stock is 25% off its yearly high of $1.62…if you subscribe to the theory of buying into weakness, CMJ looks like a wise and astute choice at $1.20…

North Arrow Minerals (NAR, TSX-V)

North Arrow has completed its recently announced 18 cent private placement (Venture Exchange approval was granted Friday) and we expect the company will very soon announce the start of drilling at its Beaverdam Lithium Project in North Carolina…we introduced North Arrow just recently at BMR at 18 cents and we like this company A LOT…it has lithium, diamond, base metal and gold interests…a quick look at NAR’s chart is very revealing…the stock closed Friday at 20 cents, testing its rising 20-day moving average…the rising 100-day SMA provides exceptional support at 18 cents, and the 200-day SMA has just now reversed to the upside…volume has started to pick up, so the technicals are telling us that good things are in store for North Arrow…with such an experienced and successful geological team led by mining legends Gren Thomas and Dr. Chris Jennings who have aggressive exploration plans at high quality projects, we have extreme confidence that this company will enjoy tremendous success this year…

Greencastle Resources (VGN, TSX-V)

Greencastle is the only stock in the BMR portfolio that’s actually down from when we initiated coverage…Greencastle finished the week at 13 cents on low volume…disappointing results from two wells drilled in southwestern Saskatchewan knocked this stock down to current levels where it’s essentially trading at cash value…for patient investors, this is the best time to be a buyer of Greencastle as it will recover and perhaps in spectacular fashion…for now, though, we see the stock stuck in a range between 12 and 14 cents…VGN has regular monthly cash flow of over $100,000 from its Primate royalties, some profitable investments in other companies including Seafield, and some potentially valuable gold properties in Nevada…

We’ve gotten to know Gold Bullion President/CEO Frank Basa pretty good the last several months.  One thing he likes to do, which is an admirable quality, is under-promise and over-deliver.  If he tells you, for example, he has a deposit with a grade of 1.2 g/t Au, you can take that to the bank – and then some.  He has consistently under-promised and over-delivered with Gold Bullion these last few months.  Which is why we believe next week’s news could send this stock soaring well beyond its all-time high of 39 cents.

Based on our exhaustive research and three days at the LONG Bars Zone last month, this is what we believe:  A multi-million ounce gold deposit exists at Granada.  Gold Bullion has hunted a good part of that down already.  They will start drilling the property again like crazy in just a few weeks and by the end of the year they’ll have a preliminary 43-101 in hand to prove just how big this really is.  By then of course the stock could be exponentially higher than it is now and perhaps even a takeover target.

Genuine opportunities like Gold Bullion right now are rare but when they do appear, the risk-reward ratio is extremely attractive.  The potential returns are mind-boggling.  In our view Gold Bullion is a major discovery in the making, in the best jurisdiction in the world for mining, which is why insiders haven’t sold a single share since drilling began last December.

We’ll be reporting more on Gold Bullion Monday.  In the meantime, take a look at the chart and comments below from John, BMR’s contributing technical analyst.  The chart is confirming everything we’re saying about the fundamentals that are driving this stock.  If you’re looking for a classic, textbook example of incredibly bullish price and volume patterns – signs that a stock is about to explode and go on a LONG run – look no further than Gold Bullion and the chart below:

Up, up and away she goes…GBB’s chart is hugely explosive.

John: The daily chart for GBB shows that this week the stock stepped up to a new level and formed a new base.

On Monday the stock opened at 29 cents with a gap-up from the previous Friday’s close of 28 cents and climbed to a new 2010 high of 36.5 cents.  Failure to close the gap or even drop below 30 cents shows the strength of this move.

For the remainder of the week we saw consolidation with a new support level established at 30 cents (horizontal green line).  Friday afternoon saw more buying pressure with the stock closing at its high for the day, 33 cents.

The price is well supported with all of its moving averages in bullish alignment (the chart shows the steadily rising 50-day SMA).

The RSI shows a strengthening as the indicator turned up on Friday (mauve circle).

The volume shows bullish behavior with rising volume on up days.

The Slow Stochastics %K (black line) did not cross down through the %D (red line) – bullish.

The ADX trend indicator shows all three lines are rather flat due to the consolidation but they are in a bullish order.  That is, the ADX (black line) is above the +DI (green line) which is above the -DI (red line).

The outlook for GBB is very bullish as shown by the chart and the indicators.

Seafield Resources (SFF, TSX-V) is up 317% since we uncovered this gem last summer when it was sitting at just 6 cents.  The stock hit a 52-week high of 35.5 cents in late February at which time we suggested traders should consider taking profits and re-enter on a pullback.

Seafield closed Friday, April 16, at 25 cents – just above its rising 100-day moving average where it has tremendous technical support.  We spoke with President/CEO Tony Roodenburg at length last night and we are as bullish as ever on Seafield.  We expect the stock to strengthen considerably as drilling commences in Colombia next month and the flow of exploration news intensifies (Roodenburg also runs Greencastle Resources and CNSX-listed Avaranta Resources – we’ll be doing a separate piece on those companies soon).

Interview with Tony Roodenburg

We’ll have our own comments on the Roodenburg interview Monday at BMR along with an updated Seafield chart.

It’s a good day to be a buyer as markets are generally weaker across the board this morning, one of the factors being a report that showed U.S. consumer sentiment has slipped to its lowest level in 5 months…gold is off sharply, down $23 an ounce to $1,136 as of 8:20 am Pacific time while the CDNX has shed 10 points to 1669…Gold Bullion Development (GBB, TSX-V) found support at 30 cents as predicted and has formed a very nice new base…the stage is set for what promises to be a very dramatic week coming up with a Granada exploration update imminent including a preliminary block model on the LONG Bars zone…as readers know, we are very bullish on the prospects for Granada and we believe the potential is very high for the discovery of a multi-million ounce bulk tonnage, open pit deposit…a new all-time high on the stock next week appears almost certain given the technical patterns and fundamentals…the stock is currently up half a penny to 31 cents…a report out this morning by the Fraser Institute ranks Quebec as the world’s most attractive jurisdiction for mineral exploration for the third year in a row…the survey was based on the opinions of 670 mining executives and managers worldwide…Seafield Resources (SFF, TSX-V) is steady at 25.5 cents…Seafield President/CEO Tony Roodenburg has consented to an interview with BMR this evening…we expect to have that interview posted to the site as an audio link by no later than noon Pacific time tomorrow…

The move by the CDNX since late 2008 (from just below 700 to nearly 1700) has been truly quite remarkable in its strength and consistency.  At some point there will be a substantial correction, likely in the order of 30% given historical patterns, but exactly when that will occur of course is impossible to say.  Our best guess is that we’ll see the CDNX take a run at the 2000 level before a major correction sets in.  That seems to be the most likely scenario – the next major resistance on the long-term charts is between 1950 and 2350.

The CDNX has proven to be an extremely reliable leading indicator of the direction in gold prices (and commodity prices in general) as well as the overall economy – the best example of this was when the Index broke down in July, 2008, prior to the collapse of everything else.  When certain analysts a couple of months ago were saying gold’s bull market was over, we were buying because the CDNX was telling a different story.

CNBC Anchor Larry Kudlow wrote an excellent article the other day that the unexpected is about to happen – a V-shaped boom is coming.  He could be right.  “Commodity charts are roaring,” stated Kudlow.  “All manner of raw materials have been booming – iron ore, steel, you name it.  More V-shaped recovery.  So with higher commodity prices running virtually across the board, there is every incentive for rapid inventory-rebuilding.”

The action in the CDNX supports Kudlow’s argument.  “I have written extensively about the tax-and-regulatory threats of the Obamanomics big-government assault,” stated Kudlow.  “But most of that is in the future.  The current reality is that a strong rebound in corporate profits (the greatest and truest stimulus of all), ulta-easy money from the Fed, and some small stimuli from government spending are working to generate a stronger-than-expected recovery in a basically free-market economy that is a lot more resilient than capitalist critics think.”

So 2010 could turn out to be a pretty good year for investors in the junior resource market.  Not of course just because of stronger growth in North America, but even more importantly because of China, India and other emerging markets where demand for raw materials and commodities continues unabated.  The Chinese have been on a resource grab which is only going to intensify.

Expect the continued CDNX surge to be fueled as well by a growing number of takeovers – Underworld (UW, TSX-V) and Brett Resources (BBR, TSX-V) are just a couple of recent examples.  The big fish are hungry, and they’re increasingly going after the little fish.

Let’s take a look now at a combined CDNX/GOLD Chart prepared by John, BMR’s contributing technical analyst, who has made some excellent calls:

CDNX/Gold chart – John says the outlook for both is very bullish.

John:  Today’s weekly chart shows the correlation between GOLD (continuous contract) and the CDNX.  The CDNX is shown in candle form and GOLD is a solid black line.  The two indicators, “Slow Stochastics” and the “ADX”, refer to the CDNX.

Consider first the CDNX.  Since the minor reversal/correction at the beginning of 2010, the Index has had a sustainable climb supported by its 20-day SMA (blue line).

The Slow Stochastics shows that the %K (black line) is high in the overbought area with the %D (red line) climbing toward it.  However, this should not cause concern at this time as both lines can remain overbought for a considerable period as we saw between July, 2009, and January, 2010.

The trend indicator, ADX, shows that the CDNX has been in an uptrend since July ’09 (green line above red line) and recently the ADX (black line) turned up, indicating a strengthening of the uptrend.

The GOLD chart has a trendline (orange line) drawn under the lows from April ’09 to the present.  This trendline is parallel to the supporting 20-day SMA of the CDNX.  Thus, both are moving in tandem.

Since January, GOLD has had two consolidation periods as shown by the two orange triangles.  The two vertical lines show the breakout points from these consolidations and the action on the CDNX at those times.  Note that GOLD broke out of the right triangle at the end of March.

Compare the slope of the GOLD trendline (mauve line) on the left with that of the orange trendline.  The mauve line has a much steeper gradient and was not sustainable.  The orange line’s gradient is less and thus should be more sustainable and remain intact for a longer period of time.

Also note that before the CDNX reversal in January ’09 there was no correlation between GOLD and the CDNX.

The outlook for both GOLD and the CDNX appears to be very bullish.  The time for concern is when and if either one breaks down through their respective trendlines.

Gold is up slightly this morning to $1,158 an ounce as of 7:45 am Pacific time…gold will give new bullish signs once it closes firmly above $1,160 with the next technical barrier between $1,170 and $1,175…the CDNX is up 1 point to 1676…by approximately 9 am Pacific time we expect to post an article on the CDNX with a chart analysis that also compares the CDNX with the price of gold…we continue to be very bullish on the Venture…it reacted near 1700 Monday but we expect it will bust through that minor resistance in the near future…Kent Exploration (KEX, TSX-V) has completed an IP survey over promising parts of its Alexander River Gold Project in New Zealand, so drilling can’t be far behind…Alexander River has an historical (non-compliant) resource of 640,000 ounces of gold and will become Kent’s flagship property after the spinoff of its Gnaweeda Gold Project into Archean Star Resources…Kent is down 1.5 cents to 19 cents…Gold Bullion Development (GBB, TSX-V) is quiet this morning, unchanged at 31 cents, with news not expected on its Granada property until sometime next week…BullMarketRun readers have been accumulating Sidon International Resources (SD, TSX-V) over the past couple of weeks between 5 and 7 cents, and we’ll be reporting more on this very interesting story in the days ahead…Sidon is unchanged at 5.5 cents…we expect North Arrow Minerals (NAR, TSX-V) to announce the closing of its private placement shortly followed by the start of drilling at its Beaverdam Lithium Property in North Carolina…North Arrow also has diamond, base metal and gold properties…we expect this company to be a strong performer in the months ahead…Seafield Resources (SFF, TSX-V) has rebounded after falling just slightly below its 100-day moving average yesterday for only the third time since last summer…Seafield is up half a penny to 25.5 cents…we have an interview coming up soon with company President/CEO Tony Roodenburg…we mentioned Everton Resources (EVR, TSX-V) yesterday…it’s not currently part of the BMR portfolio but we believe it represents excellent value at current levels (the stock is trading at 27.5 cents this morning) with a nice looking chart…its potential for a substantially higher valuation will come from its holdings in the Dominican Republic which the company will be focusing on…as always, do your due diligence…

Gold has been bouncing around quite a bit today and as of 8:30 am Pacific time it’s now up $9 an ounce  at $1,160…the CDNX is ahead 4 points to 1669…yesterday’s drop in the CDNX was clearly bargain hunting time as suggested…Gold Bullion Development (GBB, TSX-V) is steady at 32 cents this morning as it forms a new base…Seafield Resources (SFF, TSX-V) has once again hit its 100-day moving average which it has done on just two other occasions since last summer…the stock was looking very strong late last week and then did a sudden, surprising retreat…we’re looking forward to our interview in a few days with Seafield President/CEO Tony Roodenburg…the key to making money in Seafield over the past six months or so has been to buy on weakness and sell into strength, so now would certainly not be a wise time to be dumping shares…today is Seafield’s fourth consecutive trading session on the negative side, and RSI levels are the lowest we’ve seen with SFF since its big run began last year…in otherwords, we can only conclude that the current weakness is an attractive buying opportunity…Seafield has a strong portfolio of properties and the cash to advance them…the company also has the right people in place to make some big things happen…Seafield is currently at 24 cents, down 1.5 cents…a company we suggest readers put on their radar screens is Everton Resources (EVR, TSX-V)…we’ve been watching Everton closely over the past couple of months, and just recently we spoke with President/CEO Andre Audet…Everton’s Shoal Lake Gold Project near Kenora, Ontario, has an NI-43-101 compliant indicated/inferred resource of 700,000 ounces of gold, but what has us excited about Everton is its huge presence in the resource-rich Dominican Republic…it has nearly 400 square kilometres of mineral rights there including a large land position directly adjacent to Barrick/Goldcorp’s Pueblo Viejo deposit that contains over 20 million ounces of gold…Everton hasn’t promoted its DR holdings effectively enough but we suspect that’s about to change in the near future…they’ve had some very encouraging early exploration results out of the DR…Everton is trading at 29 cents this morning for a market cap of approximately $24 million…

Gold has eased off again this morning after yesterday’s intra-day reversal…gold is down $8 an ounce as of 8:30 am Pacific time to $1,148…it ran to a 4-month high yesterday of $1,170, so a brief period of consolidation appears likely before gold resumes its climb…very strong support exists at $1,140…the CDNX, in sympathy with gold, reacted as it neared 1700 yesterday…the Index is off 23 points this morning to 1650…we look for the CDNX to find support at its 10-day moving average of 1640…Gold Bullion Development (GBB, TSX-V) made an attempt this morning to get through yesterday’s new 52-week high of 36.5 cents but reacted at that level, with the CDNX off sharply, and has reversed course…Gold Bullion is currently at 33 cents, down half a penny on over 1 million shares…technically, the new support for GBB is right around 30 cents…Gold Bullion President/CEO Frank Basa told BMR yesterday he expects to release an exploration update on Granada, including the Preliminary Block Model, within a week to 10 days…we were impressed with Basa in the interview…with heavy interest in the stock, he had an opportunity to be “promotional” but wasn’t…he was very businesslike and matter-of-fact, a style that demonstrates what this is clearly all about – the serious business of discovering a potentially major gold deposit…Basa showed us he has confidence the upcoming results will speak for themselves…interestingly, 3 of the top 10 volume leaders on the CDNX yesterday were companies along the “Cadillac Trend” – Gold Bullion, Alexandria Minerals (AZX, TSX-V) and Century Mining (CMM, TSX-V)…Kent Exploration (KEX, TSX-V) is up 1.5 cents to 21 cents this morning on low volume after a very busy day yesterday…Sidon International Resources (SD, TSX-V) is unchanged at 5.5 cents…BullMarketRun readers have been accumulating Sidon over the past couple of weeks between 5 and 7 cents…we expect to be reporting more on Sidon in the very near future…Seafield (SFF, TSX-V) President/CEO Tony Roodenburg has agreed to an interview with BMR which we expect within the next week…that’ll be a great opportunity for Seafield investors to get a better idea of what is happening on the ground with the company’s properties and exploration in Colombia…we have questions for Roodenburg as well regarding his Greencastle Resources (VGN, TSX-V) which is languishing at cash value of 13 cents…Richfield Ventures (RVC, TSX-V) is off 7 cents to $1.92 this morning…Colombian Mines (CMJ, TSX-V) is up 4 cents to $1.25…CMJ touched its 50-day moving average yesterday for only the second time since last September…North Arrow Minerals (NAR, TSX-V), a new company we introduced just last week, is sitting at a very attractive 20.5 cents this morning…we expect North Arrow to start drilling its North Carolina lithium property very soon…this is a company with a terrific portfolio of properties and the geological and financial strength to be a huge winner this year…