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Regular BMR readers know we are very optimistic about the prospects for Seafield Resources (SFF, TSX-V) as it continues to develop its Quinchia Gold Project in Colombia.  The stock has traded within a narrow range of 15.5 to 18 cents since early last month, a pattern that could continue for a little longer until developments on the ground accelerate.  Patience is the key here.  Seafield has a highly prospective land package and an excellent chance of eventually outlining a multi-million ounce deposit at Quinchia (low grade, high tonnage).  The fundamentals are very sound with this company.  The final 4 months of 2010 could be “turnaround time” for Seafield as results start to flow in from Miraflores, Dos Quebradas and Chuscal – the company’s 3 flagship properties at Quinchia, just a short distance from Medoro’s (MRS, TSX-V) 10 million ounce Marmato Deposit.  Today, BMR’s technical analyst updates Seafield from a chart perspective and sees some things he likes:

John: On Friday, Seafield traded in a very narrow range between 16 and 16.5 cents.  It opened and closed at 16.5 cents on CDNX volume of 268,000 shares – it’s highest volume since August 5.  Like many other juniors, Seafield is waiting for assay results as it continues to drill its Miraflores property in the Quinchia District of Columbia.  Initial assays are now expected sometime next month.

Looking at the 6-month daily chart we see that SFF has been trading in a horizontal trend channel since July 8 between 15.5 and 18 cents.   This has been a consolidation period where buyers have been scooping up weak shares.  If there had been a lot of sellers and few buyers the stock would have fallen significantly below 15.5 cents.   This has provided strong support.

During this past week there has been a change in the trading pattern. There were white candles on Wednesday and Thursday, indicating buying pressure, and then on Friday the trading formed a “Dragonfly Doji”. This is very significant in that this candle has bullish implications. Its shadow shows that the market fell during the session but buying pressure pushed the price back up to close at the high for the day – not only that but at the close the asking price rose to 17 cents.  The horizontal trend channel is shown with the top line (blue) denoting resistance and the lower line (green) indicating support. The next major resistance after 18 cents is at 22 cents (see the blue horizontal line).

Looking at the indicators:

We see the RSI is flat just below the bullish 50% level. The bullishness of the last 3 days is not reflected here yet as the period of the RSI is 14 days.

The increase in buying power is reflected even more in the Chaikin Money Flow Indicator where the brown negative bars (below zero) started to get shorter on August 16 and then finished at  +0.107 (green) on Friday.  This is very bullish.

The Slow Stochastics shows the %K (black line) crossed over the % D (red line) below 20% and both are climbing.  This is also very bullish.

Outlook: I expect Seafield to challenge the 18 cents resistance level this coming week.  This stock has a strong base.  With improving technicals and sound fundamentals (good cash position, lots of drilling and exploration, and an excellent project in Quinchia), Seafield appears poised for a strong finish to the year.

CDNX and Gold

The CDNX had another powerful week –  up 23 points to 1480 – and an assault on resistance around 1500, where a rising 200-day SMA and a declining 100-day SMA have converged, appears imminent.  The CDNX ended a nasty 2-month correction (within an ongoing bull market) of 20% July 6, bottoming at 1343, and since then has jumped 10%.  Given various technical clues, historical patterns and the strength of this market over the past 6 weeks, there is little doubt in our view that the CDNX is in the midst of a very strong move that could easily take it to a new 52-week high prior to year-end.  The current move could accelerate quickly once the Index convincingly gets through 1500 – the exact timing of that event of course is uncertain, and the first attempt may not even be successful.  But it’s highly likely to occur, given overwhelming evidence, and by sometime next month at the latest.  This bodes well for the overall markets and also for Gold (it’s also interesting to note that China’s Shanghai Index hit a 3-month high this past week).  The CDNX has significantly outperformed the broader markets as well as the TSX Gold Index since early last month – while the Venture is up 10% since July 6, the Dow and the TSX are each up 5.7% while the Nasdaq is ahead 4.9%.  The TSX Gold Index has gained 7% since July 6, so we have seen a reversal since early last month in the performance of the CDNX relative to the Gold Index.  With the very speculative CDNX such a proven accurate leading indicator, its current bullish state bodes well for the broader markets and Gold and casts serious doubt on near-term market crash predictions being made by a considerable number of analysts and newsletter writers at the moment.    And a great contrarian piece of evidence that the bulls will enjoy came in today from the New York Times which reported that American investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first 7 months of this year (according to the Investment Company Institute, the mutual fund industry trade group).  If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.  Market bulls have to love that kind of news.  The CDNX is speaking loud and clear – this is a time to be bullish.  Gold enjoyed another good week, up $13 an ounce to $1,228.  We see the floor for Gold at $1,200, give or take 1%, and of course there is heavy resistance from $1,250 through to June’s all-time high in the $1,260’s.  With the bulls clearly in control right now, and Gold now entering a period of traditional seasonal strength, it seems inevitable to us we’ll see the yellow metal at new all-time highs this fall (our prediction is around $1,350).  One final pullback to just below $1,200 has to be considered a possibility prior to a successful breakout to new highs.

Gold is seeing some profit-taking today with the yellow metal down $6 an ounce as of 8:15 am Pacific to $1,227…Gold has traded within a range of $1,221 to $1,234 so far today…the U.S. Dollar is up sharply this morning which has contributed to some of Gold’s weakness but the two have shown they can move in tandem…the CDNX is down 3 points to 1,470, in sympathy with losses in the broader markets and in Gold and Oil…Gold Bullion Development (GBB, TSX-V) is unchanged at 51 cents…it’s interesting to note that Jordan Capital, a key player to track in GBB, bought 196,500 of the first 211,200 shares that traded in the first hour this morning…they were on the buy side in 10 of the first 18 trades, a very positive sign…on the Gold Bullion chart, which BMR’s technical analyst updated last night, the second symmetrical triangle that has formed right now is very similar to the pattern we saw in January and February prior to the March breakout…Sidon International (SD, TSX-V) is down another penny this morning to 12 cents on nearly 2 million shares…Sidon’s Morogoro East Property in Tanzania has tremendous potential – it’s certainly a hot area right now with Canaco (CAN, TSX-V) delivering such great results from Handeni – but the “news release” Sidon disseminated after the close Wednesday (which hasn’t yet been carried on Stockwatch) disappointed us…there was certainly some good news to report, which is encouraging, but we’re not sure Sidon put that news across in the most effective way…perhaps a few others picked up on that, too, as Sidon retreated from an early high of 15.5 cents yesterday on heavy volume…Excel Gold Mining (EGM, TSX-V) is up half a penny to 15.5 cents…Excel has strong technical support at 15 cents and we’re looking forward to an upcoming visit to the company’s Montauban Mining Camp Project, 120 kilometres west of Quebec City…

John: Today, Gold Bullion Development Corp. (GBB, TSX-V) opened at 50 cents, its low for the day, climbed to a high of 54 cents, then closed at 51 cents – up 1 penny for the day – on total CDNX volume of 1.5 million shares.  The volume today was almost twice that of Wednesday’s yet the share price never dropped below 50 cents, indicating there are plenty of buyers around to engage the sellers.  Please examine the updated chart carefully, and you can read my analysis below it:

Looking at the 9-month weekly chart, we see that GBB is trading in an 8-week symmetrical triangle, a consolidation period.  The consolidation is mainly caused by the lack of drill results and the absorption of some of the April financing shares which became available for trading August 9.  There was concern among some investors that these shares would cause heavy selling with a resulting serious drop in the share price.  That just hasn’t happened, however.  The stock has been under pressure at times but has held up well, all things considered.

In a previous symmetrical triangle consolidation from mid-January to the end of February, we see that in the 7th week it broke to the upside and in one week went from 10.5 cents to 23 cents on drill results, a massive move.  More drill results are on the way which offers the potential for another big move to the upside.  It truly is a waiting game, one that strains everyone’s patience.  The rewards, though, could be very satisfying.  Granada has consistently delivered good news this year.

After the breakout in March, GBB climbed in an upsloping channel for the next 16 weeks, reaching a high of 71 cents on June 23.

Both the SMA(40) and the SMA(10) weekly moving averages provide support and are pointing up in a bullish trend orientation.

Looking at the indicators:

We see that the RSI was in the overbought region for the whole climb in the upsloping channel and dropped down at the beginning of the consolidation.  The RSI is almost flat at 59% and is bullish, above the 50% level.

The Chaikin Money Flow (CMF) indicator shows that at the moment there is only slight buying pressure.  Investors are waiting to snap up loose shares in the low 50’s.  This is to be expected in this situation – bullish.

The ADX trend indicator has the ADX trend strength (black line) high at 58% above the +DI (green line) which is above the -DI (red line) in flat orientation, showing a strong bullish trend.

Outlook: GBB‘s chart remains very positive and shows that the stock is in an area of very strong support.  The fundamentals are in place and haven’t changed.   The company has given investors plenty of clues in the last two news releases that drilling is going well and that the eastern extension is growing significantly.

Gold has hit a fresh 7-week high this morning…as of 8:20 am Pacific time, the yellow metal is up $6 an ounce to $1,235…bulls have clearly seized momentum with Gold and a test of the all-time high can’t be far off…the Dow is down over 100 points but of course we keep our eye on the CDNX which is bucking the broad market trend and is holding steady, up a point at 1471…in a significant development, the CDNX’s 50-day moving average has swung positive after a 3-month decline…the big test for the CDNX will be getting through resistance at 1500 where both the 100 and 200-day moving averages are resting at…Gold Bullion Development (GBB, TSX-V) is up a penny to 51 cents with bargain hunters stepping in this morning…Jordan Capital has been on the buy side which should put the nervous nellies at ease…those who understand this story and have done their research will wisely keep the faith…stay focused on the big picture that continues to develop with Gold Bullion…bargain hunters should also be keeping a watch on Seafield Resources (SFF, TSX-V) which is off a penny to 15.5 cents this morning…we don’t expect much out of Seafield until sometime next month but we are very bullish on the fundamentals for this company as it continues to drill its Quinchia Gold Project in Colombia…the risk-reward ratio at current levels is certainly very attractive…Seafield’s current market cap is only $15 million and the company itself has stated it believes it can show an inferred resource of 2 million ounces at Quinchia by year-end with further growth in 2011…we’re keeping a close eye on Excel Mining (EGM, TSX-V) which is unchanged at 16.5 cents…Excel holds what we believe is a very underrated property package in Quebec, the Montauban Mining Camp Project (120 kilometres west of Quebec City) which covers an area of more than 130 square kilometres…it includes the former producing Montauban Mine which has an historical resource and features near-surface gold, silver, and base metal mineralization…this is a very intriguing geological story and we’ll be reporting much more on it…

In John’s technical outlook for Excel Mining Inc. (EGM, TSX-V) Tuesday evening, he concluded with the statement, “The technicals are saying there is a fundamental change happening with this company.”

Interesting statement – John is terrific at analyzing charts, and he is truly excited with what he sees in EGM.  The technicals with Excel do look superb and we’re very much looking forward to our upcoming trip to Quebec as we’ll be checking out the company’s Montauban Mining Camp Project to get an even better appreciation of what’s developing there.  At BMR we do our homework – the BMR Portfolio is up 129% since late last year – and we’ve already researched Excel enough to know there is major “blue sky” potential here.

Below are some things we DO know – important facts – based on Excel’s latest news releases:

1.  The company holds a 130 sq. kilometre land package around the former producing Montauban Mine, 120 kilometres west of Quebec City;

2.  Mineralization at Montauban is near-surface and consists of gold, silver, zinc, copper and lead;

3.  The property is surrounded by all the necessary infrastructure including a nearby railway;

4.  There has been only very limited historical drilling below 200 metres at Montauban;

5.  Montauban has a massive sulphide core which was mined for zinc and lead in the early 20th century;

6.  Gold and silver were later discovered at Montauban, present within the base metals, but in an even greater concentration within the peripheral sulphides which have not been fully explored;

7.  Excel believes there is a good chance that the mineralized system at Montauban extends onto the surrounding land package the company has strategically assembled;

8.  Excel is completing a 3-D Gemcom overview of Montauban (this is a great geological tool) based on extensive historical geological information available on the property;

9.  Excel has completed a successful shallow drill program at Montauban which delivered near-surface gold, silver, zinc and copper mineralization (within 50 metres depth);

10.  There is an historical resource at Montauban which Excel will be quantifying in an upcoming 43-101 report.

Those are the facts.  Investors who like to do their due diligence will also discover there has been NO insider selling (only some buying) with this company in the stock’s strong move from a nickel over the past 3 months.  That is quite remarkable.  Astute investors will also note that “Grupo Moje” has stepped into the picture and was granted 1.4 million stock options at 11 cents as per Excel’s June 25 news release.

Above are just some of the facts regarding Excel that really intrigue us with this company.  We have more to report, though, and our upcoming trip to Quebec will allow us to confirm additional information on Montauban through the Quebec Ministry of Mines and a site visit.  Stay tuned – an exciting geological story is unfolding here that we believe has many more chapters.

Gold saw some profit-taking this morning but has snapped back…as of 8:35 am Pacific, the yellow metal is at $1,228, up $3 an ounce…Gold dropped as low as $1,217 this morning…near-term technical momentum is clearly in favor of the bulls with the downside “floor” likely being $1,200 where there is exceptionally strong technical support…the CDNX is off 1 point at 1462…this morning we re-posted an important article from July 16, comparing the current CDNX market with that of 2004, and also provided an update to that article…the action we’ve seen in the CDNX over the past month has certainly confirmed the thesis of the July 16 article and throws a lot of doubt into arguments put forward by current broad market bears, some of whom are calling for an imminent crash…the CDNX is telling a much different story and has proven to be a very reliable leading indicator…BMR has confirmed another visit to the LONG Bars Zone next week…we’ll be at Gold Bullion’s Granada Property next Tuesday and Wednesday…previous visits have helped immensely in terms of gaining a better overall “feel” for the project, and this visit should be no different in that respect…we’ve also been promised an interview with GBB President and CEO Frank Basa…something interesting always seems to happen whenever we hit the road, so we’re looking forward to returning to Rouyn-Noranda and the “Cadillac Trend” where we’ll be snooping around at some other situations as well…Quebec, as investors know, is a very hot address right now for mining and exploration and we expect it will get even hotter over the final 4 months of the year with more great news from Granada and elsewhere…Gold Bullion is off a penny to 53 cents this morning…we’re very intrigued by Excel Gold Mining Inc. (EGM, TSX-V) which is exploring and developing the Montauban Mining Camp Project, 120 kilometres west of Quebec City…there are some interesting parallels between Excel’s land package and Granada which we’ll explain in more detail in a separate posting later today…technically, EGM is in a powerful uptrend as outlined in John’s analysis last night…the volume surge in EGM this year is also very similar to what occurred with Gold Bullion late last year and early this year prior to GBB’s big move…Excel is currently off a penny to 16.5 cents on nearly a million shares after the first 2 hours of trading…Sidon International (SD, TSX-V) is unchanged at 14 cents…Canaco (CAN, TSX-V) announced this morning it’s accelerating the exploration program at its Handeni Gold Project in Tanzania, approximately 100 kilometres north of Sidon’s Morogoro East Property…Canaco is committing $13.7 million to rapidly advance the definition of the extent of the gold discovery at Magambazi and test proximal targets in the vicinity of the Magambazi Hill…exploration will also continue to advance and assess high-priority targets identified elsewhere along the Handeni gold trend…Canaco is down a nickel to $2.12…the stock has made a great run recently and a minor pullback and some consolidation is certainly possible, but investors should keep a close eye on this one as Handeni has all the makings of a very substantial discovery…

On July 16, BMR posted an important and very popular article (“Hopeful Sign:  2010 CDNX Chart Looks Like Repeat of 2004“) that compared the 2010 CDNX with the 2004 CDNX.  This research was significant additional evidence that the CDNX may have hit bottom in early July and helped us immensely in issuing a very bullish forecast at that time (helping our readers make money) for both the CDNX and Gold.

Today, a month later, BMR’s technical analyst is going to revisit this striking comparison (we have re-posted the July 16 article for reference purposes – we suggest you read it or read it again –  in order to fully understand and appreciate this morning’s update).

At BMR we have used the CDNX as an extremely effective leading indicator, which it is – for the broader markets, for Gold and commodities in general, and even for the overall economy.  This is one of the world’s great speculative markets and the CDNX is also very resource-based.  That’s why the technical health of the CDNX is so important to monitor.  As a classic example, when Gold and oil were both strong and moving higher in the first half of July, 2008, the CDNX was going in the opposite direction and broke down severely by the end of the month – moving much quicker to the downside than the Dow or the TSX.  This signaled that major trouble was ahead (speculative money is always the first to flee danger) and sure enough markets across the board soon crashed.  That’s why we don’t believe in the theory being advanced by some analysts right now that another major crash is on the way – the CDNX is not confirming this.  To the contrary, the CDNX has been leading the overall markets (and Gold) to the upside over the past 6 weeks.  Far from an imminent crash, we could very easily be on the verge of a major upside breakout.  That’s what the CDNX is telling us.

Below, on the left, is the CDNX 2010 chart while the 2004 CDNX chart is beside it on the right.

John: With this update let us cover the period from July 1 to Aug 13.  This is a very important period because it includes the lows of each year and the expectation of a reversal to the upside.   We see on the 2004 chart the CDNX was in a horizontal trend channel and did not break to the downside into a lower horizontal channel until the third week in July.   On the 2010 chart we see that the CDNX moved into the lower channel around July 1,  so the base consolidation started about 3 weeks earlier.   The eagerly awaited breakout to the upside on the 2004 chart occurred around the 3rd week of September whereas this year it occurred during the 3rd week of July – 2 months earlier.

After the breakouts, the CDNX, on both charts, has moved in exactly the same pattern and in an upsloping channel.   The outlook for the remainder of this year is very bullish. I expect we will see the Index continue to move up in an orderly manner within the upsloping channel until at least the end of the year.