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BMR’s track record for finding undiscovered “gems” in the speculative junior resource market speaks for itself.  The 10-stock BMR model “Portfolio” is up a whopping 273% this year (as of last Friday) with several of those companies (AGE, GQC, VGN, CUI) added over just the last few months.  Today we added an 11th company to the BMR Portfolio, Cadillac Mining (CQX, TSX-V), and not just because we like the name.

Mark our words, Cadillac Mining is a major turnaround situation that has the potential to absolutely explode.  For two years, as revealed in CQX’s Monday news release, this company has been researching precious metals targets in Elephant Country – the Great Basin in the United States.  Victor Erickson and Andre Audet are smart mining people.  Reading between the lines of Monday’s release, it’s our view they’re close to pulling the trigger on a major deal that could quickly transform this company.

But that’s not all.

With a paltry market cap of only $6.5 million, CQX holds over 7,000 hectares along the amazing Cadillac Trend.  Their landholdings are centered between the Noranda mining camp, host to VMS and Gold deposits, and the 11 million ounce Kerr Addison Mine.

If you look at Gold Bullion Development’s (GBB, TSX-V) latest property map on the GBB web site, everything in light green to the west of Granada belongs to Cadillac Mining and its new partner, Visible Gold (VGD, TSX-V).

Cadillac Mining, however, retains a 100% interest in the strategic and potentially very valuable Wasamac claims (several kilometres north of GBB’s newly-acquired South Kekeko Property).  Richmont Mines (RIC, TSX) is drilling its Wasamac Property like crazy right now and getting excellent results.  Richmont is making new discoveries at this former producing mine.  Their aggressive drilling continues and they expect to come out with more results and an updated resource calculation next month.

The principal structure hosting the Wasamac Gold mineralization dips northerly toward the seven titles comprising 164 hectares owned by Cadillac.  In addition, the Horne Creek fault, host to significant mineralization to the northeast, and the related McClay splay, also cross Cadillac’s Wasa Property which is largely untested for its Gold potential.  Only one hole has ever been drilled on Cadillac’s Wasa claims and it intercepted a zone that is interpreted to be a feeder system typical of those seen under VMS systems in the Noranda camp.  The discovery of an alteration pipe on these claims, and Richmont’s drilling success in the immediate vicinity, underscore the value of this important asset for Cadillac Mining.

The share structure for Cadillac Mining is extremely attractive with only 25 million shares outstanding and just 27.5 million fully diluted.  Management holds over 20% and it should be pointed out that insiders haven’t sold a single share during this explosion in trading volume (nine million shares on the CDNX over the last 11 sessions).

We asked BMR’s technical analyst to examine the CQX chart and he decided to take a personal position in this company as well.  The chart confirms that Cadillac Mining has started a new chapter in its history.  Record volume surges like we’ve seen with this stock over the past few months are typically a tell-tale sign of big developments on the way.  Note on John’s chart below that the 200-week SMA has reversed to the upside – a technical turnaround such as this is hugely bullish and is a very clear sign that the fundamentals with Cadillac Mining have changed for the better.  CQX at less than $10 million in market cap is an absolute steal in our view, especially considering the very bullish possibilities for the CDNX in 2011.  You can read John’s analysis immediately below this impressive-looking chart:

John: Today, Cadillac Mining (CQX, TSX-V) opened at 23 cents, dipped to a low of 21 cents, then exploded to a high of 28 cents before closing at 26 cents for a gain of a nickel (23.81%) on CDNX volume of 1.3 million shares (176,500 shares were traded on the ALPHA market).  Through the first 4 days this week a record number of CQX shares, 5.2 million, have traded on the CDNX – very bullish.

Looking at the 1-year weekly chart above, we see that from the beginning of 2010 – and even before that – this stock traded in a horizontal trend channel. The volume was thin until the 2nd week in June (shortly after Richmont started drilling Wasamac ) when it gradually increased until a breakout from the channel to the upside occurred during the 1st week of November (thin blue vertical line).  Since then the weekly volume has been near or above 1 million shares. In the 6-week period from Nov. 1 to now, the price has climbed from a low of 6 cents to a high this week of 28 cents.  This is a stock on the move and the technicals are confirming a major turnaround in this company with similar patterns to what we saw with GBB, CUI, SD, VGN and SFF.

Because we have seen such large relative movements in price (from 6 cents to 28 cents, a factor of more than 4) with CQX, the chart and the indicators can appear distorted unless longer period smoothing techniques are used. Trading during the past 3 weeks has formed a “3 White Soldiers Candle Pattern” which is classed as a continuation pattern. So with the high daily volumes we can expect this to continue for the immediate future.

I have shown a very long term SMA(200) weekly moving average which had been declining until recently and has now turned up and is providing bullish support. Also shown is the SMA(50) weekly moving average which is also pointing up in bullish support.

A set of Fibonacci levels is shown (blue lines) and the next near-term target is at the 36 cent level (this is not a BMR price target as we don’t give price targets but a theoretical Fibonacci target based on technical analysis as a guide for investors.  BMR readers may recall that recent Fibonacci targets for CUI, VGN and SD were reached and even exceeded).

Looking at the indicators:

In order to smooth the RSI, I have used a 50 period instead of the usual 14. The RSI(50) at 74% shows there is room to move higher without becoming overbought – bullish.

The Slow Stochastics %K (black line) is at 94% and the %D (red line) is at 87%. Both are in the overbought region but as we can see from early in the year they can stay overbought for an extended time on a weekly chart in a bullish trend – bullish.

The ADX trend indicator has the +DI (green line) pointing up at 65 and well above the -DI (red line) at 7.  The ADX (black line) trend strength indicator is at 33 and climbing – a very bullish orientation.

Outlook: The turnaround in this company has begun. The volume has increased dramatically since the beginning of last month and the chart and indicators show a very bullish future.