BullMarketRun.com

It is not wise to be “chasing” gold stocks right now, especially overbought ones, as there is little question in our minds that gold is likely headed lower over the very near term as we have warned about here since last week…the short-term oscillators are very overbought and a $100 drop in the price of gold is certainly not out of the question – in fact, it would be a welcome development as that would unwind the overbought conditions and lay the groundwork for new record highs early in the New Year…gold is definitely in need of a rest and we hope it will take one…large gaps have also opened up with its major moving averages, and that too is an important reason for caution…we suggest investors review their portfolios carefully and lock in some profits, particularly on precious metals stocks that are technically overbought…we saw a front page newspaper headline Friday that one typically sees when markets are overbought and about to turn, “New Gold Rush…Metal’s Rapid Rise Sparks Party Craze.” That was the front page story in last Friday’s Vancouver Province, though jewelry (not gold stocks) was the focus of the article…Noront Resources (NOT, TSX-V) has increased its share offer to 86 cents per share for Freewest Resources (FWR, TSX-V) this morning as they try to out-bid Cliff’s Natural Resources…we are very bullish on the Ring of Fire and investors with a little patience should consider putting Noront in their portfolios…fair value on Noront is much higher, we think, than just over $2.00 per share and a triple from current levels during 2010 seems very plausible…in addition, over the short-term, the best Freewest acquisition strategy for Noront is to get its share price considerably higher…also, don’t rule out the possibility of a hostile takeover attempt of Noront…we also like Probe Mines (PRB, TSX-V) and MacDonald Mines (BMK, TSX-V)…we caution, however, that Probe is technically overbought at current levels (48 cents in early trading this morning)…