BullMarketRun.com

8:00 am Pacific

John: Yesterday, Adventure Gold (AGE,TSX-V) opened at 56 cents, its low, rose quickly to a high of 63 cents and then closed at 58 cents. It gained 3 pennies (5.45%) on CDNX volume of 594,000 shares.  The trading activity in this stock recently has been very interesting.  As of 8 o’clock this morning Pacific time, AGE is 3 cents higher at 61 cents.

Looking at the 4 month daily chart, I have presented the Slow Stochastics (SS) behind the price to illustrate how SS crossovers can warn investors of probable reversal points especially in sideways trading situations.  At the same time I’ve include another indicator, 4 instead of 3.

We see that between November 8 and February 15 the trading was within a horizontal trend channel (top blue line, bottom green line). Then on Feb. 15 there was a breakout to the upside which took the price from a low of 56 cents  to 67 cents and the next day it rose again to an all-time high of 80 cents. From Feb. 16 to now the stock has been in consolidation with the volume declining accordingly.

Yesterday, the up volume increased significantly which is a bullish sign in any consolidation. The base support for this consolidation is strong at 55 cents.

Looking at the indicators: The RSI(5) shows 3 “W” formation in the last 4 months. The ones in Nov. and Feb. occurred just prior to significant breakouts and another has formed during this consolidation. The Feb. overbought condition has been completely unwound and the RSI has bounced up from support at 50%.  It now sits at 57% and is pointing up- very bullish.

The Slow Stochastics (SS) shown behind price gives three clear instances where the %K (black line) has crossed above the %D (red line) to provide warnings of imminent or near-term upward price moves. At the present time there appears to be the strong probability of another crossover to the upside with %K at 39% and %D at 40% – very bullish.

The Chaikin Money Flow(CMF) indicator showed strong buying pressure during the breakout.  It fell significantly during the consolidation as expected. Presently it’s at a low 0.025.

The ADX trend indicator is in bullish orientation with the +DI (green line) at 30 and above the -DI (red line) at 10. The ADX (black line) trend strength indicator is at 30 and climbing – very bullish.

Outlook:  The chart pattern and all the indicators point to the probability of a move to the upside in the very near future.

Note:  The writer holds a position in AGE.

Gold has traded in a range of $1,397 to $1,415 today…as of 8:10 am Pacific, the yellow metal is up $13 an ounce at $1,412…Silver is ahead 63 cents at $33.69 while the U.S. Dollar is down over one-third of a point to 77.36…the greenback has not seen the flight to safety like it has in other periods of geopolitcal unrest which gives the Gold bulls even more encouragement…HSBC stated this morning, “Given the calls for reforms and the growing diversity and complexity of the protests (in the Middle East), a significant geopolitical premium may remain in Gold for this year, and should tensions rise further, this could catapult Gold to new highs”…the CDNX, after a 60-point sell-off yesterday, has stabilized this morning and is currently up 3 points at 2367…the drop yesterday was into a zone of strong technical support, slightly below the 10-day moving average (SMA) but right at the 20-day SMA…one-day drops of that magnitude can rattle the nerves of many investors but as long as the trend continues to be strongly bullish, as it is, a 60-point haircut for the CDNX can open up some really nice buying opportunities…Cadillac Mining (CQX, TSX-V) is off a penny at 34 cents… following Richmont Mines‘ (RIC, TSX) news last week of a major expansion of resources at Wasamac, where Cadillac holds seven strategic claims, there has been steady accumulation of Cadillac which has the potential of accelerating into a stampede of buying once more investors are aware of the situation…our theory is that Richmont will build a plant at Wasamac (production of 100,000  ounces per year is possible based on the resource numbers) which would also serve their nearby Francoeur Mine…Francoeur is going into production around mid-year with the ore being trucked to Richmont’s Camflo Mill at Malartic…there would be considerable cost savings by processing the ore from Francoeur at Wasamac…Richmont currently has three rigs at Wasamac and is proceeding with a new 35,000 metre drill program in order to upgrade and expand current resources of 1.4 million ounces…Desjardins is now calling Wasamac a potential “game-changing asset” for Richmont…our hope is that Cadillac will seize the moment and drill its Wasa claims in order to test for a possible high grade extension at depth of the Wasamac deposit…the structure dips 50 to 55 degrees toward Cadillac’s claims and the deposit is open in different areas at depth…Cadillac also has VMS targets at its property…technically, Cadillac is looking very strong and a reversal to the upside yesterday in the 20-day (SMA) is another bullish sign…at 34 cents, Cadillac’s market cap is only $8.5 million and the company holds more than 7,000 additional hectares along the Cadillac Trend as well as an entire former mining camp (Goldstrike) in Utah near the Nevada border…that’s a major project that Cadillac will be pursuing with vigor…Seafield Resources (SFF, TSX-V) continues to show strength after falling as low as 31 cents on panic selling last week…Seafield is another half penny higher at 46 cents this morning as some sanity returns to that market…a second drill rig at Quinchia is going to be immensely helpful in terms of advancing this project with the focus now on highly prospective porphyry targets at Dos Quebradas and Santa Sofia…GoldQuest Mining (GQC, TSX-V) bounced off its 50-day moving average (SMA) this morning it has done consistently over the last several months…GoldQuest is one of our favorites with a quality pipeline of projects in the Dominican Republic where the company has been exploring for over a decade…initial drill results from Escandalosa are due soon along with a 43-101 resource estimate for the company’s Toral zinc-lead-silver deposit in Spain…GoldQuest is currently unchanged at 41 cents after falling as low as 38.5 cents this morning…Everton Resources (EVR, TSX-V) is also a company we like very much in the DR, and Everton enjoyed a strong day yesterday as it climbed a nickel to 37 cents on volume of over 1 million shares…Everton and its partner Brigus Gold Corp announced last week the start of a deep drilling program at its APV concession contiguous to Barrick and Goldcorp’s massive Pueblo Viejo deposit…Everton is currently up half a penny at 37.5 cents…a move through 40 cents on high volume would constitute a technical breakout…Gold Bullion Development (GBB, TSX-V) is unchanged at 56 cents…there is very strong technical support for GBB in the low-to-mid 50’s, as John has outlined, but the stock may have to trade around current levels for a little while for base-building purposes prior to another potential fresh advance…

John: Today, Gold (continuous contract) gapped up at the open from Friday’s close at $1,387.50 to $1,405.90. It then rose to a high of $1,410.60, fell to a low of $1,392.90 and then recovered slightly to close at $1,397.90 for a gain of $10.40. The bulls are clearly in control as demonstrated by the chart and analysis below.

Looking at the 5-month daily chart above, we see that between November 1 and the end of December the price pattern was a “head and shoulders”. The details and measurements of this pattern are shown on the Gold chart below from Feb. 8:

This is a textbook pattern example. After breaking below the neckline at the beginning of January, Gold had 3 down days before it rallied to touch the neckline again. This was normal and the expectation was for this pattern to continue its downward trend toward our target of $1,300 (green horizontal line).

As you can see, Gold moved down to a low of $1,308 before rebounding to the upside. From there the trading has formed an upsloping channel as shown by the top upsloping blue line and the green upsloping support line in the first chart.  It is interesting to note that recently two writers did not draw the upsloping channel as shown but drew an upsloping wedge. There is a very big difference here in that an upsloping channel is bullish whereas an upsloping wedge is bearish. This is just one instance that shows that technical analysis is a mixture of art and science.

In the first chart I have drawn a resistance level at $1,406 (horizontal blue line) but there is a resistance band between $1,406 and $1,410. We also can see that this resistance level, the open today and the resistance of the channel, all coincide at $1,406. The extension of the neckline is also a resistance and must be considered in the future.

The daily SMA-50 (blue line) moving average provided close support until the breakdown of the neckline but now after drifting sideways for nearly 2 months it appears to be turning up (bullish).  The daily SMA-200 (red line), which represents the long term trend, is pointing up as shown in the first chart.

Looking at the indicators:

From the point of the low at $1,308, the RSI reversed from the 30% level and has slowly climbed to the 65% level – bullish.

The Slow Stochastics (SS) has both the %K (black line) and the %D (red line) in the overbought area at 92% and 94% respectively. This can remain overbought for a long time when Gold is in a strong uptrend, so for the moment it is of no concern.

The ADX trend indicator shows that between the beginning of Jan. to Feb. 15 the short term trend was bearish (between the 2 orange vertical lines) but is now bullish with the +DI (green line) at 28, pointing up and above the -DI (red line) at 13 which is pointing down.

The ADX trend strength indicator (black line) is rather low in this daily chart and turning up at 22.  The long term or primary trend that would be displayed on a weekly chart (not shown here) is very bullish with the +DI at 28, pointing up, the -DI at 14 and pointing down and the ADX trend strength flat at 37 – a very bullish orientation. The ADX indicator is one of the best for analyzing trend strength and direction.

Outlook: After trading in a ” head and shoulders” pattern for 2 months, Gold has completely unwound its overbought condition.  With both the short term and primary trends looking strong,  the outlook for Gold is very bullish.

Gold has traded in a range of $1,392 to $1,408 today…as of 8:35 am Pacific, the yellow metal is now off just $2 an ounce at $1,405 after a big move yesterday…Silver is down 74 cents  at $33.17 while the U.S. Dollar is essentially unchanged at 77.77…Gold hit a 7-week high overnight on civil unrest in Libya that also sent London Brent and U.S. light sweet crude oil prices to 2.5-year highs…the current environment for Gold is very positive and new all-time highs could be just around the corner…the CDNX got as high as 2438 this morning before going into retreat…as of 8:35 am Pacific, the Venture is now down 17 points at 2406…the supporting 10-day moving average (SMA) is sitting just below 2400…Gold Bullion Development (GBB, TSX-V) continues to recover…GBB is ahead three pennies this morning to 61 cents…Cadillac Mining (CQX, TSX-V) is on the move again thanks to a recently announced huge increase in 43-101 resources for Richmont’s (RIC, TSX-V) Wasamac Property near Rouyn-Noranda…the structure hosting Gold mineralization at Wasamac dips northerly toward the seven claims held by Cadillac which should find Richmont’s disclosure extremely encouraging…after 20,000 metres of drilling at Wasamac last year, Richmont has outlined plans for an additional 35,000 metres of drilling, so Wasamac is going to be a hot-bed of activity…given the news from Richmont, we believe there’s a very good chance Cadillac is going to seize the moment and drill its property as well…this is a great exploration story and holding ground that could be the depth extension of a potential 100,000 ounce-a-year producing mine is a major bonus for Cadillac which also has much more going for it…Cadillac is up another 2.5 cents this morning to 34 cents which gives it a market cap of only $8.5 million…Seafield Resources (SFF, TSX-V) is strong again today, up 3 pennies to 45 cents…the panic last week over an article concerning Ian Park allowed for a great buying opportunity as we believed it would…Seafield has recovered quickly from its low of 31 cents last Monday…that’s a classic example of why it’s so important to stay calm and not get emotional when something unexpected happens with a quality situation such as Seafield…the company has a valuable land package at Quinchia in Colombia with multi-million ounce potential…Sidon International (SD, TSX-V) is unchanged at 14 cents…in a positive technical development, Sidon’s 20-day moving average (SMA) is very close to reversing to the upside after being in decline for much of January and all of February so far…the chart for another company we follow in Tanzania – Currie Rose Resources (CUI, TSX-V) – is also looking increasingly bullish…CUI is up half a penny at 19 cents…with just a couple of weeks to go before PDAC in Toronto, where it will be showing off some of its core, we’re expecting news soon from GoldQuest Mining (GQC, TSX-V) – specifically, initial drill results from its La Escandalosa Property in the Dominican Republic and a 43-101 resource estimate for its Toral zinc-lead-silver deposit in Spain…GoldQuest is drilling about 40 holes at Escandalosa where the goal is to outline 1 million near-surface ounces…with strong management and excellent projects in its pipeline in addition to Escandalosa, GoldQuest has the potential to be a huge winner in 2011…the stock has more than doubled since we introduced it to BMR readers in late September and the chart is a picture of beauty…GQC is currently up a penny at 43 cents…Abcourt Mines (ABI, TSX-V) stands to benefit considerably from higher silver prices as interest in its Abcourt-Barvue Silver-Zinc Property should continue to intensify…ABI is unchanged at 20 cents…the company released more positive high grade assay results last week as it attempts to upgrade and augment reserves and resources at that former producing property which is one of the best silver assets in the country…

GoldQuest Mining (GQC, TSX-V)

GoldQuest was off 2.5 cents for the week at 42 cents but this company’s stock chart is looking extremely bullish with a well-established uptrend and an exceptionally strong support level between 40 and 42 cents…we’re expecting important news very soon – initial drill results from the La Escandalosa Gold Property in the DR and a 43-101 resource estimate for the Toral deposit (zinc-lead-silver) in Spain…GQC has more than doubled since we introduced it to our readers several months ago and it’s one of our favorite picks for the balance of this year…GoldQuest has a pipeline of high quality projects in the mineralization-rich Dominican Republic where it has been exploring for over a decade…management, led by new President and CEO Julio Espaillat and Chairman Bill Fisher, has a proven track record in the DR as demonstrated by the nearly $200 million takeover of GlobeStar late last year, their previous project…the company is also building a strong and valuable presence in northwest Spain where its base metal/silver properties are not yet fully appreciated by the market…in the DR, drilling continues at La Escandalosa where the company’s goal is to upgrade and expand resources substantially beyond the 400,000 compliant inferred ounces  outlined in late November…this is a flat-lying ore body and “the economics could be really quite compelling,” Fisher told BMR…it’s important to stress the 43-101 was completed on La Escandalosa  at a very early stage and the possibility of a discovery of one million ounces or even more is very possible as this is such an attractive geological target…the deposit is open at depth as well as to both the south and the north toward another discovery of Gold mineralization by the company at Hondo Valle, approximately 1.2 kilometres away…Gold at La Escandalosa occurs as a flat-lying stratiform zone at shallow depth with mineralization interpreted to be part of a larger intermediate sulphidation replacement-style system which has now been defined intermittently over a strike length of 2,100 metres…the source of the mineralizing fluids remains unknown at La Escandalosa, leaving open the possibility of the discovery of mineralization in structural feeder zones or perhaps in a porphyry copper-Gold type system…the current inferred resource is over a 25-hole section 350 metres long…successfully linking this central mineralized zone to the north and the south is what could take this deposit to the million ounce plus category which would allow for production of 100,000 ounces per year…no major infrastructure or political hurdles…the regulatory framework in the DR is conducive to mining…GoldQuest has many other targets of considerable merit throughout its large DR land package including Las Animas which has a 43-101 inferred resource of 129,000 ounces of Gold, 2.5 million ounces of silver, 106 million pounds of copper and 130 million pounds of zinc…GQC will be drilling Las Animas immediately after Escandalosa…that will be followed by a drill program at Jengibre, a promising target about 30 kilometres southeast of Escandalosa…in Spain, Goldquest holds the Toral zinc-lead-silver deposit which has an historical (non-43-101 compliant) resource of 5.4 million tonnes grading 9% zinc, 6% lead and 45 g/t Ag…a 43-101 on Toral is due very soon…GoldQuest has also acquired a second polymetallic project in the area (Lago, just a 20-minute drive from Toral)…GoldQuest, which has nearly $4 million in the bank, is up 115% since we introduced it to our readers near the end of September…this is a stock that got as high as $1.80 ($100 million market cap) in mid-2007 on less than what it has now…initial drill results from La Escandalosa and the 43-101 on Toral could come by the end of this month, or certainly prior to PDAC, and Fisher has promised strong news flow throughout the year…GQC has all the ingredients to become a huge winner this year as the bull markets in Gold and the CDNX intensify…

Greencastle Resources (VGN, TSX-V)

Greencastle was down 3 pennies for the week, closing at 22 cents, but John’s chart earlier today shows how the stock has strong technical support at current levels and limited downside risk…Greencastle tripled in value over a six-week period from late October to early December…since the beginning of January, though, the stock has struggled due mostly to impatient investors frustrated with the lack of news…there hasn’t been news from Greencastle since November 30…however, with approximately $6 million in working capital, three Gold properties and monthly cash flow from an oil royalty, it doesn’t take a rocket scientist to figure out that VGN is a bargain at current levels…volume has been low on the move down which confirms there’s nothing to be concerned about here…Greencastle will have its day in the sun again soon enough…the long-term chart remains very bullish with rising 100, 200 and 300-day moving averages (SMA) that are in no danger of reversing…it’s also interesting to note that President and CEO Tony Roodenburg, a large shareholder in VGN, has refrained from selling any of his holdings in recent months despite the fact the stock price more than tripled in value on high volume…this is different from past runs in the stock and adds further credence to our view that we haven’t seen the highs in this cycle yet from Greencastle – it’s poised for what we believe could be a massive breakout sometime during the first half of this year…Pinetree Capital has also accumulated more shares in Greencastle, so there’s every reason to be very optimistic regarding this company’s prospects in the days, weeks and months to come…Greencastle is up 57% since we added it back in to the BMR model portfolio four months ago…

Adventure Gold (AGE, TSX-V)

John correctly called a breakout for Adventure Gold which ran from a low of 48.5 cents Monday to an all-time high of 80 cents two days later…the stock then pulled back and closed Friday at 59 cents which was still a healthy 9-cent gain for the week…some of the results from Granada released by Gold Bullion Tuesday have positive implications for Adventure Gold and we’ll be going over that in more detail as part of a major article this week…of course AGE is also waiting for some drill results from one hole drilled completely on its property (eastern extension) and a few others that intersected that property at depth…there’s a lot more to Adventure Gold, however, than just Granada…a 2,500 metre drill program started at Pascalis-Colombiere (eastern part of Val d’Or mining camp) in December and is testing the former L.C. Beliveau Mine at depth (below 300 metres) as well as near-surface parallel Gold structures to the west…Pascalis-Colombiere is just 1.5 kilometres east of Richmont’s (RIC, TSX) operating Beaufor Gold Mine which has produced over one million ounces in its lifetime…it’s safe to assume Richmont will be watching developments at Pascalis-Colombiere with interest…Adventure Gold’s property has significant upside exploration potential…the geological setting is favorable for the identification of new high-grade Gold bearing veins and structures or bulk-style ore shoots…there are many untested areas and excellent potential at depth…L.C. Beliveau was a very profitable former producer…if AGE can prove up something significant through extensions to this deposit, we see a potential deal with Richmont which would be the natural choice to bring the mine back into production…we first mentioned Adventure Gold to our readers in an article September 29, just a couple of days following the company’s announcement that it had acquired land at Granada, when the stock was trading in the low 20′s…we officially added AGE to the BMR model portfolio at 34 cents October 28, so the gain since then is 74%…Adventure Gold has been around only since late 2007 and we are impressed by the company’s solid portfolio of properties (19 in six strategic areas in Quebec and Ontario)…also of immediate interest is AGE’s partnership with Lake Shore Gold (LSG, TSX) on the Meunier 144 Property where deep drilling is currently testing the down plunge extension of Gold zones located at the Timmins and Thunder Creek deposits…the current initial deep drill hole onto the Meunier JV property is continuing…when completed it’s estimated the hole will provide a deep cut on the projected target area at about a vertical depth of 2,600 metres…this will enable shallower wedge cuts to be considered if significant mineralization is found to be present in this area…the initial deep hole was collared on LSG’s Timmins mine property last August and has passed the 2,000 metre mark in depth…if this deep hole succeeds, AGE could absolutely explode…

Sidon International (SD, TSX-V)

Sidon closed exactly at its 200-day moving average (SMA) last Tuesday at 12 cents and then exploded the following day to 16.5 cents on volume of over 7 million shares…the stock pulled back over the following two days, closing at 14 cents Friday for a weekly gain of 1.5 pennies…there was no news last week, so the powerful move Wednesday may have been due to speculation regarding upcoming drill results…it may also have been technically driven or perhaps a combination of both…in any event, a new uptrend seems to have set in and we’ll watch closely for confirmation of that this week…the stock has shown clear trading patterns since the spring of last year and has been quite volatile…however, the primary trend remains up and Sidon has consistently found support at or just above the 200-day SMA…BMR will be interviewing President and CEO Kamal Alawas in the near future but a date for that has not yet been confirmed by Alawas who could be waiting for news prior to speaking with us…results are pending from drilling at Sidon’s Morogoro East Gold Property…the company reported zones of disseminated sulphides of pyrite and pyrrhotite as well as some chalcopyrite and arsenopyrite over intervals of 30 to 70 metres throughout all six holes drilled…we caution that visuals are not always reliable but there’s reason to be optimistic that Sidon could be on to something…the company is also trying to develop a placer operation at Morogoro and has also acquired ground near Canaco’s discovery…this company has come a long way since last March when we first introduced it to BMR readers at a nickel, and its new web site is just one more indication of how impressively Sidon has developed and matured…we see exciting possibilities for 2011…the company raised over $1 million through the exercise of options and warrants in November and December…

Seafield Resources (SFF, TSX-V)

Seafield got hammered last Tuesday thanks to an article that put Ian Park, the company’s Colombian Country Manager, as well as the affairs of Seafield in an unfavorable light…the article was very unfortunate in our view and failed to make any mention of Park’s impressive exploration track record in Colombia…he’s a geologist and a geophysicist but the piece referred to him only as a “promoter”…the timing of the article was also suspect as it was released during the trading day and only a few hours after Seafield came out with more drill results from Miraflores…the wolf came out of nowhere and quickly scared the chickens away…the stock went up after the Seafield news release, reaching a high of 46.5 cents, but then tanked after the article hit the wire as a lot of nervous retail investors pressed the sell button…fear and greed rule the markets and it’s critically important to understand that when dealing with these speculative exploration stocks…those who have done their homework and know the underlying value of Seafield jumped in at the height of the fear Monday/Tuesday and picked up some cheap stock…Seafield recovered from a low Monday of 31 cents to close at 42 cents Friday, a gain of half a penny for the week…the recovery was aided by a Seafield conference call Tuesday and impressive drill results Thursday from neighbor Batero Gold (BAT, TSX-V)…what excites us most about Seafield is its Dos Quebradas Property as well as the adjoining Santa Sofia and La Loma targets…drilling continues at Dos Quebradas while a second rig is being brought in to commence drilling at Santa Sofia…the geological case for Seafield’s Quinchia land package is compelling and we’re looking forward to this project’s continued development this year…

Gold Bullion Development (GBB, TSX-V)

Gold Bullion threw a nasty curve ball at the market last Tuesday morning – assay results on a whopping 56 holes were suddenly dumped on the market early that trading day, allowing investors no time for interpretation and creating an instant panic that caused the stock to tumble from a high of 77 cents that day to a low of 53 cents…this was a classic example of a poor corporate communication strategy…the stock very quickly broke important technical support after the news came out Tuesday and this just made matters worse…having said that, there were many encouraging and even some exciting results which is why the stock began to stabilize after its Terrible Tuesday and strengthen later in the week…GBB closed Friday at 58 cents, a loss of 15 cents for the week…for the first time since 2009 Gold Bullion is now trading below its 100 and 200-day moving averages…that kind of chart damage has consequences and creates new overhead resistance…on the bright side, the 200-day SMA at 62 cents continues to rise and the rising 300-day at 48 cents provides backup technical support to that which exists in the low 50’s as John outlined in his recent chart…our faith in the Granada Gold Property remains as strong as ever and we’ll be going into detail on the latest results in a major article this week…

Cadillac Mining (CQX, TSX-V)

Cadillac roared back to life last week and its chart shows a stock that appears ready to explode…Cadillac jumped 5.5 cents last week to close at 31.5 cents…the strength started Wednesday, the day after CQX’s AGM in Vancouver, and price and volume both increased the following two days…the trend has definitely reversed with Cadillac after a normal retracement that took the stock from a high of 50 cents January 4 to a low of 21 cents February 3…keep in mind this is a stock that was trading as low as a nickel in November…it made an extremely powerful move through December, so a pullback for a month or so was very healthy from a technical standpoint as the stock cleansed its overbought condition…in situations like this, a reversal in the 20-day moving average (SMA) is the “sweet spot” for traders and investors – the ideal time to jump in…Cadillac’s 20-day is now reversing to the upside and that means there is plenty of strength ahead with the high probability of a new up-leg now underway…the fundamentals support the bullish new technical picture…Cadillac’s move last week coincided with the release of Richmont Mines‘ (RIC, TSX-V) new 43-101 resource estimate for its Wasamac Property, 15 kilometres west of Rouyn-Noranda…measured and indicated resources have increased sharply to 411,000 ounces while inferred resources have more than tripled to one million ounces for a total of 1,418,000 ounces…the principal structure hosting Gold mineralization at Wasamac plunges north at a dip between 50 and 55 degrees toward Cadillac’s 100%-owned ground…we’ll be reporting much more on this in the coming week, but our belief is that Richmont is going to build a plant at Wasamac with production of 100,000 ounces a year quite possible based on the new resource numbers from that property…building a plant at Wasamac would also help lower production costs for Richmont’s nearby Francoeur Mine which is going into production later this year…initially, ore from Francoeur will have to be trucked to the company’s Camflo Mill at Malartic for processing…a plant at Wasamac may make a lot of strategic sense…after completing 20,000 metres of drilling last year at Wasamac, Richmont will be drilling 35,000 more metres this year…given this bullish news on Wasamac, our prediction is that Cadillac is going to seize the moment and initiate a drill campaign of its own at its Wasa claims in order to test for a possible high grade depth extension of the deposit…in addition, Cadillac has already identified some very promising VMS targets on those claims…with a market cap of just $7.9 million, it’s not hard to figure out Cadillac has major upside potential based solely on developments at Wasamac…the company also has 7,000+ additional hectares along the Cadillac Trend in an exploration partnership with Visible Gold (VGD, TSX-V) which intends to drill aggressively, likely beginning within a few weeks…on top of all that, Cadillac has secured an entire former mining camp in Utah near the Nevada border (the “Goldstrike District”) which has Carlin-type potential…Goldstrike produced over 200,000 ounces of Gold and Silver from numerous open pits in the late 1980’s and early 1990’s…the area has never been properly explored and Cadillac is planning a major exploration program in order to unlock the potential value of Goldstrike…

Abcourt Mines (ABI, TSX-V)

Abcourt released assay results last Tuesday from six more holes at its Abcourt-Barvue Silver-Zinc Property near Val d’Or, and the market liked what it saw…the holes were all drilled 150 to 200 metres from surface and five of them intersected two zones of high grade silver and zinc…Hole #16 cut 152.26 g/t Ag over 12.7 metres…the stock jumped 3.5 cents Tuesday to 20.5 cents on 2.5 million shares…it held its ground through the rest of the week and closed Friday at 20 cents for a weekly gain of 3 pennies…the surge in the silver price to new 30-year highs is extremely bullish for this play…the heavy accumulation that began in Abcourt in December was no fluke in our view…this is a company with significant assets that could justify a substantially higher valuation…nearly 60 million shares of ABI changed hands on the CDNX in December and January – record volume for this stock, accompanied by a price jump from 14.5 cents…we’ve seen these type of volume surges before and they are always a very positive sign…Abcourt is being accumulated, and our best guess is that some savvy players like the assets in the ground…the 10,000 metre drill program at Abcourt-Barvue continues with the goal of upgrading and augmenting existing 43-101 reserves and resources…the company is also trying to justify an expansion of the proposed mill from 650,000 tonnes to one million tonnes…Abcourt-Barvue is a former producer and one of the best silver assets in the country with nearly 20 million ounces in all-category reserves and resources (plus nearly 300,000 tonnes of zinc)…in addition, the company holds the former producing Elder Gold Mine near Rouyn-Noranda which it hopes to put back into production within 18-24 months (considerable infrastructure is already in place as we saw during our recent site visit)…drilling continues at both Elder and the adjacent Tagami Property where there is strong potential for a significant discovery…Abcourt completed a $4 million financing at the end of December…with 110 million shares outstanding, its market cap currently sits at just $22 million…continued drilling success and even higher prices for Gold, silver and zinc would be exciting developments for this stock which has a history of major moves…from mid-2005 to early 2006, Abcourt rocketed from 15 cents to nearly $1.40…

Currie Rose Resources (CUI, TSX-V)

It’s definitely turnaround time for Currie Rose which bottomed out at 15 cents in late January…after being in decline for six weeks, the stock’s 20-day moving average (SMA) has finally reversed to the upside…this is one of several important clues that the stock’s recent woes are now over and a new uptrend is underway…the CMF has been showing steadily increasing buying pressure throughout the month…RSI and Stochastics indicators are looking positive as well…Currie Rose was up half a penny for the week at 18.5 cents…the first major area of resistance will be in the low 20′s in the vicinity of the still-rising 100-day SMA…the company last came out with news January 25, announcing a joint-venture deal with Australian-based Liontown Resources for Currie’s Jubilee Reef Gold Project in Tanzania…CUI’s focus is on the Sekenke and Mabale Hills Projects, so finding a partner for Jubilee Reef made sense…the deal commits Liontown to at least 5,000 metres of drilling at the property this year which will give Currie Rose a minimum of 23,000 metres of drilling at all of its properties in 2011…an 8,000 metre program is now underway at its Scadding Gold Property near Sudbury which was optioned to Trueclaim Exploration (TRM, TSX-V)…this property will be getting some major exposure with a segment on “Today in America” which is expected to air nationally on the FOX Business Network and regionally on CNN Headline News…while Currie Rose has had its market cap shaved considerably, from a high of nearly $40 million to the current $16 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as it ever was in our view…

Richfield Ventures (RVC, TSX-V)

Richfield enjoyed a powerful week, climbing 54 cents to close Friday at $5.40, very close to its all-time high of $5.49 February 8…on that day the company released the final seven holes from its 2010 drilling at Blackwater (a new program is now underway)… a one-kilometre mineralized zone from east to west has now been defined…the latest results included 206 metres grading 1.56 g/t Au in BW-114 and 39 metres of 2.74 g/t Au in BW-112 which was collared 100 metres east of known mineralization…the company will be drilling at least 30,000 more metres this year and is also working on a Preliminary Economic Assessment which should be completed by the fall…given the state of the Gold market and the likelihood of continued exploration success at Blackwater, we don’t believe the stock will be hanging around current levels for very long…we were very pleased to see that Richfield got a well-deserved buy recommendation recently from GMP Securities which has initiated coverage on RVC with a 12-month target price of $11.10 per share…BMR introduced Richfield to its readers in December, 2009, when the stock was trading at only $1.20…GMP sees the potential for at least five million ounces of Gold at Blackwater which is located in central British Columbia…the primary trend remains up with Richfield and there’s every reason to expect more excellent drill results throughout 2011…we believe the company’s ultimate objective is to find a buyer who can put this deposit into production…if good drill results continue as we expect they will, we’re confident that objective will be met and the takeover price could be much higher than the company’s current market cap of approximately $235 million…

CDNX and Gold

The CDNX continues to power higher as it surged past the important 2350 resistance area last week which served as strong technical support on several occasions between 2006 and 2008.  The CDNX gained 66 points on heavy volume last week to close at 2424.  A major new upleg is clearly underway and with precious metals taking off again and commodities in general in a very robust bull market, it’s not hard to imagine the CDNX taking a run at 3000 within the first three to six months of this year.  The masses, still licking their wounds from the 2008 Crash, are still not in this market which tells us there’s much more upside left.

Gold stocks have been the laggards on the CDNX through the first six weeks of 2011 (this incredibly powerful bull market has shown a lot of rotational leadership) but we expect that will change immediately with the yellow metal now back above $1,400 and looking extremely bullish. We see some incredible potential profit opportunities in the weeks and months ahead.

A wave of change in the Middle East has been a key factor in Gold’s recent strength.  The yellow metal climbed nearly 3% last week, finally breaking through its 50-day moving average (SMA) and an important area of resistance between $1,370 and $1,380.  Today, Gold is up sharply (along with oil prices) and back above $1,400 an ounce while Silver has hit a new 30-year high of $34.

The chaos that has erupted in Libya is of particular importance as it’s the first major oil exporter to be engulfed by the Middle East uprisings and the first to see significant disruption to oil production.  The country is one of the world’s biggest oil producers, accounting for around 2% of global daily output, and has the largest proven oil reserves in Africa.  Crude oil prices are now above $90 a barrel with a whopping 6% increase today.

The fundamental case for Gold remains so incredibly strong – currency instability and an overall lack of confidence in fiat currencies, an extended period of negative real interest rates (inflation is greater than the nominal interest rate, even in China and India despite increasing rates there), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts (with the volatile Middle East being the focus right now)…the list goes on.  It’s hard to imagine Gold not performing well in this environment.  New all-time high prices are likely just around the corner and John will be providing us with an updated chart later today.

The World Gold Council (WGC) confirmed last week that 2010 was an incredible year for Gold.  Overall demand grew by 9% to reach a 10-year high.  Demand for jewelry was the biggest contributor, accounting for 54% of the total.  The chart below shows the huge increase in jewelry demand coming from India, Hong Kong, China and Russia – they all love Gold. And the higher Gold goes, the more they love it.

Overall, jewelry demand increased 17% in 2010 despite significantly higher prices in many currencies.  Interestingly, Gold demand for technology increased 12%.  Surprisingly, investment demand declined 2% as investment in Gold ETFs fell 45%.  Even with the drop, however,  2010 was the second-highest year on record in terms of investment demand for Gold.

China’s appetite for Gold remains very strong.  The WGC says the country consumed 175.2 tons of Gold in the 4th quarter of 2010, bringing its grand total for the year to 579.5 tons or 18.5 million ounces.  By comparison, the U.S. bought 203.3 tons last year.  It appears China is trying to legitimize its currency by ramping up its Gold holdings.  Aggressive buying of Gold and Silver by China’s central bank is generating a lot of interesting and controversial theories.  And of course individual citizens are also buying large quantities of Gold.

The rise in Chinese Gold demand also goes hand-in-hand with a rise in average incomes for Chinese citizens. Last year, 20 million migrant workers in China saw their incomes rise 24 percent. Compare this to the U.S. where the job market has shown some signs of life but continues to sputter.

With these higher income levels, many in China’s middle class are looking to Gold as a means for long-term savings and a possible hedge against inflation. The success of the WGC’s Gold accumulation plan is an example. It allows Chinese consumers to purchase small amounts of Gold on a routine basis to build a portfolio.

We’ve had quite a few comments concerning Greencastle recently as the stock has clearly been a disappointment so far this year.  Greencastle has languished entirely due to the fact there has been no news for two-and-a-half months since President and CEO Tony Roodenburg signaled to the market last fall that this company was about to get much more aggressive in the Gold exploration space.  The momentum that Greencastle had going into 2011 quickly faded but that doesn’t mean it’s time to throw this stock overboard.  In fact, quite the contrary.  Momentum in a junior resource stock can change quickly.  And the fundamentals with Greencastle are very strong with at least $6 million in working capital (13 cents per share), monthly oil royalty revenue, and three Gold properties with the possibility of another acquisition as Roodenburg has suggested.  So the fundamentals should hold this stock up and propel it forward again as soon as Roodenburg starts to make things happen.  Technically, rising 100, 200 and 300-day moving averages (SMA) underscore the fact Greencastle is still very much in the midst of a long-term uptrend – that’s important to keep in mind.  There’s little to worry about here.  John examines the rest of the VGN technical picture below:

Looking at the 6-month daily chart we see that Friday’s trading closed at strong support (horizontal green line) on reduced volume. This support appears strong because at the end of January/early February, this level was hit 3 times with the stock price then bouncing up to the 27 cent area.   Another support level is shown at 20 cents.   The EMA(20) has provided close bullish support during the flagpole from November to December and is now a close resistance indicator during this decline. One of the first signs of a reversal to the upside will be a confirmed white candle close above this moving average accompanied by a large increase in volume. That would be a good entry point from a TA perspective.  Some words of wisdom if I may:  Never “bail out” of a stock without first consulting a chart.

Looking at the indicators:

I have used the RSI(2) because we need to see how close the indicator is to the extreme position of zero so we are better able to time a reversal. You can see that except for one case in Jan., the RSI(2) reversed from the oversold condition rather quickly. On Friday the RSI(2) was at 4% at the close and pointing down. Be aware that this could reverse above 30% quickly.

The Slow Stochastics has the %K (black line) pointing down at 30% and below the %D (red line) at 40%. This could reverse quickly as well.

The Chaikin Money Flow (CMF) indicator shows that the distribution or selling pressure is now at zero. This indicates that a reversal could occur in the near future.

Outlook: Greencastle is trading in an area of strong technical support with limited downside risk from current levels.  The chart pattern and indicators show that a bounce or a reversal to the upside could occur in the near future.

Note:  Both John and Jon continue to hold a position in Greencastle.