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We correctly called the end of the recent CDNX correction earlier this week, and what normally happens after a major CDNX pullback is the exact opposite – this market has the potential to absolutely explode to the upside. In the span of just one week the technical picture has changed dramatically for the Venture Exchange and massive profits could be made in the weeks ahead for those who understand right now what’s likely unfolding here.

This morning, prior to the market open, BMR’s technical analyst takes a detailed look at the suddenly very bullish CDNX chart:

John: After Wednesday’s impressive gain, the CDNX made another strong move yesterday.  At the open it gapped up to 1488, retreated during the day to a low of 1469, and then closed strongly at the high of the day – 1504 – for a gain of 34 points.

Looking at the chart, the CDNX is at a resistance level at 1500 but with the strength shown at the close yesterday (white candle with a shaved top) there should be no problem going higher today.

On the chart I have circled the candles at the reversal.  We have two bullish reversal patterns there.  The long red candle and the long white candle form a “bullish piercing pattern” and the long white candle and the short white candle create a “bullish reversal harami”.

The bottom of this correction occurred at the same level as a previous low in December, 2009, thus providing strong support for this reversal.

Looking at the indicators:

The RSI has climbed out of the oversold area and is moving toward 50%.  It will be very bullish if this 50% line is crossed.

On the RSI I have circled several “W” formations.  If you look at the price chart at these times, you will see a low has occurred and sometimes a consolidation.  From these lows the RSI has always risen up again to the overbought region (i.e. above 70%).  With this reversal the CDNX is on track to climb and make new highs.

The Slow Stochastics %K (black line) has crossed up above the %D (red line) – very bullish.

The Accumulation/Distribution line (A/C) shows the A/C line only dipped below the 20MA (red line) at the beginning of May (the start of the correction) and now is about to go back above the 20MA line – very bullish.

The Fibonacci levels are shown as blue bars with the target level being 1770.

Outlook: The outlook for the CDNX is very bullish, especially after yesterday’s strong move, with our target level now being a new high of 1770.

Gold is up $5 an ounce to $1,216 as of 8:00 am Pacific time…the CDNX, meanwhile, continues to surge and is up 27 points to 1497…Gold Bullion Development (GBB, TSX-V) is pushing higher this morning…GBB is ahead 2.5 cents to 40.5 cents…the stock is technically and fundamentally positioned to head significantly higher in the month of June and should be a market leader in this post correction move by the CDNX…Kent Exploration (KEX, TSX-V) started trading again this morning after yesterday’s halt…Kent released drill results from Gnaweeda which included an 18 metre intersection (between 115 and 133 metres depth) at the Bunarra Zone which graded 11.09 g/t Au…Kent gapped up to 21 cents this morning but has since backed off to 18.5 cents on volume of nearly 2 million shares…the Gnaweeda Project clearly holds a lot of promise which should make Kent’s spinoff of Archean Star Resources very successful…Richfield Ventures (RVC, TSX-V) hasn’t yet participated in the Venture recovery and is sitting at $1.30 this morning, up 2 cents, where it’s an attractive buying opportunity…North Arrow Minerals (NAR, TSX-V) has made a nice 5-cent jump this morning (though on fairly light volume) to 22 cents…

Kent Exploration (KEX, TSX-V) got a pleasant surprise yesterday from drill results at its Gnaweeda Gold Project in Western Australia – an 18-metre section grading 11.09 g/t Au at the Bunarra Zone, 18 kilometres south of the more advanced Turnberry Prospect.  That is certainly a significant result, and should give Kent a needed boost especially considering the shallowness of the hole – the intersection was from 115 to 133 metres.  We see no reason now why Kent can’t quickly complete the financing required for the Archean Star spinoff which will advance the entire Gnaweeda Project.

Only one of the five holes drilled at Turnberry produced an encouraging result but that property holds very strong potential, based on historical work.  Geologists undoubtedly learned much more about the structural controls at Turnberry from this first round of drilling which will assist them later on.

Gnaweeda is an exciting project and further exploration should yield potentially very significant results.  Kent’s focus now has to be on completing the spinoff before turning its attention to two other valuable assets – the Alexander River Gold Property and the Flagstaff Barite Property.

Gold is surging again this morning, up $13 an ounce to $1,214 as of 8:15 am Pacific time…the CDNX correction which began May 3 is now officially over in BMR’s view…the market bottomed at 1393 last Friday, finding strong support around 1400 where it was supported in December of last year and again in February…the correction occured over 15 trading days and amounted to 295 points or 17.5%, almost identical to the last “normal” correction with the CDNX in early January, 2008…the CDNX is up 31 points to 1481 this morning…given the market turnaround, Gold Bullion Development (GBB, TSX-V) is an immediate buy as it can be expected to significantly outperform the market as it has done since early March…new all-time highs are likely just around the corner with GBB based on technical and fundamental factors…Gold Bullion is currently up a penny to 39.5 cents…Kent Exploration (KEX, TSX-V) has been halted and BMR has confirmed that the company will be releasing assay results from Gnaweeda…given that Kent’s project is a joint venture with Teck, both companies have to sign off on the results and the release so it’s possible trading in Kent may not resume until late this morning or even tomorrow…at BMR, we have been extremely bullish on the geological potential of Gnaweeda and investors are now about to get a very good first real glimpse of that potential…

6:40 am Pacific time:

BMR is declaring the 1393 low last Friday on the CDNX the bottom for this correction which took the Index from 1688 May 3 to as low as 1393 May 21 – a correction of 17.5%.  More later.

In addition, Kent Exploration (KEX, TSX-V) has been halted this morning pending news – we suspect the news is regarding drill results from Kent’s Turnberry Prospect at Gnaweeda.  This should prove very interesting.

Gold is up $7 an ounce at $1,199 as of 8:00 am Pacific time…the Dow and the TSE are each down about 200 points while the CDNX, after a powerful move Friday, is off 19 points this morning to 1434…the market “fear” level is extremely high right now, suggesting now is clearly not the time to throwing good stocks overboard…if anything, now is the ideal time to be a buyer in selective issues…lost in all the noise this morning were new figures on U.S. consumer confidence which is now at its highest level in two years…the fact the CDNX has been outperforming the major markets the past couple of trading days is very encouraging…the up-trend channels for Gold and the TSX Gold Index remain very much intact despite last week’s sell-off…Gold Bullion Development, which is facing the imminent possibility of a declining 20-day moving average for the first time since its move began March 1, is off another 1.5 cents to 37.5 cents…there should be very strong support for GBB in the mid-30’s…the rest of the BMR Portfolio is quiet this morning…Richfield Ventures (RVC, TSX-V), which was beaten down severely last week (17%) for no fundamental reason, is up a penny this morning to $1.35 where it represents excellent value…$25 million has been knocked off the market cap of this stock over the past month…an example of the opportunities a market drop can present…

CDNX and Gold

The CDNX snapped out of a vicious 6-session losing skid Friday with a bullish white candle, violently reversing to the upside and finishing 32 points higher at 1453 (interestingly, its 200-day moving average).   Was 1393 early Friday the bottom of this correction which began May 3?  It is possible.  Volume was light but so too was volume light at the market reversal in early February.  The type of action we saw Friday – a quick plunge followed by an immediate reversal – is normally what we see at important market bottoms with the CDNX.    From May 3 thru the low on Friday, the CDNX dropped 17.5% over 15 trading days, very similar to the 18% drop we saw in early January, 2008, over 12 trading sessions.  The average CDNX correction since 2004 (excluding the extraordinary crash of 2008) has been 23% over 26 trading days.  So here are three scenarios we could be looking at with the CDNX:

1. The market bottomed and reversed Friday with a new up-leg underway (1400 was very strong support in December and again in February, so it could be that this level is a very important floor for the CDNX in this ongoing bull market);

2. Friday’s action is a “bear trap” and the market turns lower yet again, finding support at 1300 – just below the 300-day SMA and in line with historical corrections (a 23% drop from the high);

3. The CDNX experiences a 30% correction, plunges to 1200 where there is extremely strong support, and a fresh up-leg commences.

Any of the above 3 scenarios is possible.  What’s important to note, however, is that the CDNX remains in a long-term bull market which is defined by rising 200 and 300-day moving averages that are in no danger of reversing.  The worst-case scenario downside risk from here is 17%.  It makes sense, in our view, to hold some cash but also embrace the 235 point drop we’ve seen since May 3 by investing in quality situations that have been knocked down in price.  Three months from now – maybe even within a month – this market is likely going to be significantly higher.

What was particularly interesting and perhaps critical about Friday’s CDNX action was the fact the Venture reversed ahead of the major markets and finished with a stronger percentage move as well.  The CDNX has proven to be a very reliable “leading indicator” and what we saw Friday suggested a couple of things:  1) The correction is over with the broad markets which will now move higher; and 2) Gold is going higher, which indeed it is today.

Gold fell significantly last week but its long-term uptrend channels remain firmly intact.  Gold’s moving averages also remain in bullish alignment, so there’s every reason to believe that Gold will strengthen from here and perhaps take another run at its $1,250 high.  Some individual gold stocks are looking strong on the charts – Yamana Gold (YRI, TSX), for example, has been a bit of a laggard in the sector since the beginning of the year but its 50-day SMA has now turned positive.  Its 200-day SMA is also rising.  If Yamana is showing signs of moving higher, this bodes well for the price of Gold.  The TSX Gold Index and the HUI are both technically very healthy and remain within their long-term uptrend channels despite taking a recent 10% hit.

The BMR Portfolio

Gold Bullion Development (GBB, TSX-V)

Gold Bullion survived last week’s market carnage and even gained a penny on the week to close at 39 cents…the stock traded almost 10 million shares and even reached a new all-time high of 46 cents last Tuesday…there is incredible technical support for Gold Bullion in the mid-30’s, so we very much doubt the stock will drop below that level even if the CDNX were to experience another substantial decline…the fundamentals driving this play are exceptionally strong…quite simply, GBB should be accumulated on any weakness…drilling ramps up at the Granada Gold Property next month with a second rig…we suspect close to 2,500 metres has been completed so far…

Richfield Ventures (RVC, TSX-V)

Richfield had the unfortunate distinction of making it into the Venture Top 10 list for biggest percentage losers last week…the stock dropped 17% to $1.34, the 9th worst percentage loss…all that means is that Richfield is an even better buy now than it was a week earlier…the stock found support at its 200-day SMA Friday which continues to rise strongly…since last month, $25 million has been knocked off Richfield’s market cap for absolutely no reason…the company’s 25,000 metre drill program continues at Blackwater in central British Columbia with more results expected next month…we have every reason to believe Richfield is on track for the discovery of a multi-million ounce gold/silver bulk tonnage deposit at Blackwater that could make this stock a very attractive takeover candidate…

Seafield Resources (SFF, TSX-V)

Seafield is consolidating in the upper teens which is a positive technical development…what we’re waiting for with Seafield is a reversal in its 20-day SMA which should occur very soon, perhaps as early as the end of this upcoming week…June, in otherwords, could be a strong month for Seafield as drilling gets into full swing as its Colombian gold properties…the stock closed Friday at 18 cents, down 2.5 cents from the previous week…accumulation around current levels makes a lot of sense as we believe a significant recovery is in store for this stock very soon…

Kent Exploration (KEX, TSX-V)

Kent’s inability to complete the financing for Archean Star Resources has been frustrating and somewhat bewildering…however, our faith in this company and its prospects remains unshaken and we’re anxiously awaiting drill results from Turnberry…the Gnaweeda Gold Project has immense geological potential and Turnberry is the most advanced property in that package…Kent is clearly hoping for strong assay results from the five holes drilled at Turnberry earlier this spring in order to complete the proposed Gnaweeda spinoff…Turnberry certainly has the potential to deliver…all investors can do is sit back and wait…Kent dropped 2.5 cents last week to 16.5 cents…the stock fell as low as 14 cents where it found strong support…

North Arrow Minerals (NAR, TSX-V)

North Arrow enjoyed its 2nd consecutive weekly gain, closing at 21.5 cents but on light volume…drilling continues at North Arrow’s highly prospective Beaverdam Lithium Property in North Carolina, and preparations continue for a summer drill program at its diamond properties at Lac de Gras…this is a stock with tremendous blue sky potential especially because of its 100,000 acres in the heart of diamond country in the Northwest Territories…Gren Thomas and Dr. Chris Jennings are aiming to repeat their success nearly 20 years ago when they discovered one of the world’s richest kimberlitie pipes at Diavik…

Sidon International (SD, TSX-V)

Sidon is strongly supported technically by rising 100 and 200-day moving averages between 4.5 and 5 cents, so further accumulation at those levels is recommended if any nervous nellies wish to part with their shares…the company is waiting for CDNX approval of its $750,000 financing at a nickel…Sidon has a letter of intent to acquire an option to purchase 80% of the Morogoro East Gold Property in Tanzania…this is a highly prospective property and a potential company builder for Sidon…the substantial and aggressive accumulation of this stock since mid-March suggests much higher prices are yet to come…

Colombian Mines (CMJ, TSX-V)

The outllook for CMJ continues to be positive…fundamentally, the company holds a vast portfolio of high quality grass roots exploration projects in Colombia…a very experienced management team, intimately familiar with that country, can be expected to build shareholder value over the long term…drilling continues at Yarumalito which has delivered encouraging early results…technically, the stock has very strong support between 90 cents and a dollar…CMJ is underpinned by a rising 200-day SMA at 75 cents that is in no danger of reversing…CMJ closed Friday at $1.01, a 9-cent drop for the week…any additional weakness should be considered a buying opportunity for investors with a longer term outlook (3 to 6 months and beyond)…

Greencastle Resources (VGN, TSX-V)

Greencastle was down a penny on the week to 12 cents…for long-term investors, the stock is clearly a tremendous buy right now with Greencastle trading at cash value and generating regular monthly cash flow of at least $100,000 with its Primate royalties…no value is being placed by the market on the company’s Nevada gold assets…nobody loves Greencastle at the moment which means now is a good time to be accumulating…