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Commodities, and Economic & Political Trends Impacting
The Resource Sector & Equity Markets
 

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January 27, 2011

BMR Morning Market Musings…

Markets are giving up some of yesterday’s big gains…after a bounce yesterday, Gold is getting is getting kicked this morning but we firmly believe there’s a high probability the yellow metal is making an important bottom…as of 8:55 am Pacific, Gold is off $26 an ounce at $1,320 (it fell as low as $1,315) while Silver has declined 68 cents to $26.93…this is the type of “shake out” action we love to see as a market looks for a bottom…the U.S. Dollar Index is up one-fifth of a point at 77.94…the CDNX’s powerful move yesterday, and the fact it’s holding up reasonably well this morning in the face of substantial weakness in Gold, is important evidence that the decline in precious metals is drawing to a  close…the CDNX is currently off 9 points at 2242…the CDNX refused to break down below 2200 when it had an opportunity to do so the other day…its strong out-performance vs. Gold and the TSX Gold Index since early December is no fluke and tells us what direction Gold’s next big move is going to be…commercial traders, who are almost never wrong, also agree as they have sharply curtailed their short positions to levels not seen since prior to Gold’s big push last year…it’s never wise to bet against the commercial traders…Abcourt Mines (ABI, TSX-V), which received a buy recommendation this morning from newsletter writer Clive Maund, is unchanged at 19 cents after climbing as high as 21 cents…Abcourt also came out with more drill results from its Silver-Zinc Property near Val d’Or…three holes intersected two zones of high silver and zinc values…the 10,000 metre program continues with the goal being to upgrade and augment existing 43-101 reserves and resources which, in all categories, total 19.6 million ounces of silver and nearly 300,000 tonnes of zinc as detailed in Abcourt’s news release this morning…GENIVAR completed a feasibility study in 2007, showing robust economics at baseline prices of $15 for silver and 88 cents for zinc with an 1,800 tonne per day operation…most of the silver and zinc can be mined as open-pit…this property was a producer back in the 1980’s until plunging silver and zinc prices shut it down…Abcourt is also developing another former producer, the Elder Gold Mine, near Rouyn-Noranda…a 10,000 metre drill program continues there with very encouraging results…we see the potential for about 30,000 ounces of production per year out of Elder as an underground operation…it’s Abcourt’s goal to put Elder into production by the end of next year…considerable infrastructure is already in place…given the resources and reserves this company is sitting on, Abcourt’s current valuation of $21 million has to be considered cheap…another company we’re watching closely along the Cadillac Trend is Visible Gold (VGD, TSX-V)…VGD has taken a beating for no fundamental reasons since hitting a 52-week high of 70 cents in early December…the company is in a strong cash position and yesterday announced a $6.5 million exploration budget for this year with a target of 40,000 metres of exploration and definition drilling at its various properties…VGD has a current market cap of $19 million…the stock has strong technical support at 36 cents, just above its rising 100 and 200-day moving averages…VGD is led by an energetic President and CEO, Martin Dallaire who lives in Rouyn-Noranda and knows the area like the back of his hand…we suggest readers perform some due diligence on Visible Gold…the stock is currently down a penny at 40 cents…Gold Bullion Development (GBB, TSX-V) is off a penny at 73 cents…the stock continues to look very healthy from a technical standpoint and we’re anticipating more very good results from Granada…Seafield Resources (SFF, TSX-V) continues to hold support around the 50 cent area…its 50-day moving average (SMA) is 49 cents…new results from Quinchia can’t be far off…SFF’s 20-day SMA has been in decline since early this month…watch for a reversal in this as a sign that Seafield is ready to make its next move…the overall trading action in SFF since early December is long-term bullish…the stock is down half a penny at 49.5 cents…

17 Comments

  1. Retesting the lows at $1320 right now. Very encouraging that Silver has bounced back quite nicely so I would expect Gold to bounce back soon. Fingers are crossed that this will be the final test and we can start moving higher again. Its been a testing period for everyone but hopefully it will be over soon.

    Comment by Patrick — January 27, 2011 @ 10:28 am

  2. Thanks to BMR for their work.

    Do the technical fundamentals hold true in manipulated markets? If so then how can anyone predict or determine market lows when you have JPM continuosly pounding the PMs in collaboration with the FED?

    Comment by Jim — January 27, 2011 @ 10:40 am

  3. Have any of you guys looked into Arco Resources (ARR)? High volume today (4MM shares), properties are adjacent to Fortuna Silver (FVI) in Mexico. Have 3 silver properties on trend with FVI, today announced 10 year term road access to their silver flagship property Tres Hermanas, all infrastructure in place, prior producing silver mines (high grades found), 4.0 M market cap – 67 MM shares fully diluted. President of the company is an ex-CFO of Evolving gold – Experienced management.

    If anyone has any comments it would be most appreciated.

    Comment by Andrew — January 27, 2011 @ 12:47 pm

  4. Looks like we will have to test the $1300 level. That hopefully will be bottom? Had a look at ARR Andrew. Interesting situation alright and I have noticed that the silver juniors are rebounding already whilst the gold ones are still finding it tough. Another silver junior of interest is Stroud Resources SRR which has just closed a PP in order to drill its San Domingo property in Mexico. Not a lot of volume but sp has been strong and rose today to 8c. Worth a look. Also ABI’s results looked good and the sp is going back up. Silver should be very strong this year once this little takedown is over.

    Comment by Patrick — January 27, 2011 @ 1:25 pm

  5. Pretty quiet on the CUI front aren’t we, gushing about it a few weeks ago, harrrumph!

    Comment by Andy H — January 27, 2011 @ 2:42 pm

  6. Thanks, Andy, we always appreciate readers’ feedback, positive or negative. Currie Rose is an excellent company and just as good a company as it was a few weeks ago when it had a substantially higher share price. Technically, it is not hard to tell it is in deeply oversold territory. The Sisu River results disappointed the market and speculators in particular who fled the scene. We tend to take a longer term, bigger picture view and we see great value and opportunity in CUI’s Sekenke and Mabale Hills Projects which will be explored aggressively beginning this spring. So we maintain our position that the chance of a major discovery for Currie Rose in Tanzania is very real. On top of that, the company’s Scadding Property near Sudbury is currently being drilled and that’s an interesting prospect as well. Yes, things are a little quiet on the Currie Rose front at the moment but that will change soon enough. One strategy you may wish to consider on these speculative junior resource stocks is selling your position in a stock once it’s down 10 or as much as 20 per cent, and let your winners run. That way you avoid the possibility of ever being down 50% on one play. And you can always come back to that stock you lost 10% on down the road. This way you will take more losses but smaller losses. The focus stays on your winners and ultimately you should be ahead of the game. Even the best stock picker will take some losses. You need to cut your losses short and let your winners run (while not forgetting to take some profits along the way).

    Comment by Jon - BMR — January 27, 2011 @ 3:44 pm

  7. Speculative is the key word Andy. I guess the BMR team should know how much gold there is in the ground before the drills hit the ground, that way we could all buy a few shares and become rich.

    Comment by Vlad — January 27, 2011 @ 3:58 pm

  8. Patrick – I do own shares in Stroud Resources (SDR)…I think that company does have potential.

    Comment by Andrew — January 27, 2011 @ 5:58 pm

  9. Horrible performance by GBB!!!!!!!!!!!!!!!

    Comment by Forb — January 27, 2011 @ 8:30 pm

  10. HI GUYS, NEW TO YOUR SITE, I WAS WONDERING HOW YOU GUYS MAKE A LIVING, YOU DO NOT CHARGE A FEE FOR YOUR INFO, ARE YOU GUYS INVESTORS? I GUESS I AM JUST TRYING TO FIQURE OUT WHAT YOUR MOTIVATION IS FOR ALL OF THE GREAT INFO AND WORK YOU SEEM TO BE PUTTING INTO THIS SITE?
    THX

    Comment by GREG H — January 27, 2011 @ 10:44 pm

  11. Keep up the good work guys, this storm will blow over soon. Looking at 5 yr chart on gold, its clear to see we have a corrective move in place. Look at the Yen in gold prices over the next while as JS points out! Fundamentals are very much in place. Juniors always bare the brunt of intense sell-offs.

    Comment by Herb — January 28, 2011 @ 3:38 am

  12. Hi Greg, good question. I haven’t quit my day job. John is retired and Terry is a paramedic in Richmond, BC. We’re being patient with the site and its development. We keep our costs low but obviously there is an investment of time. We’re building up a loyal following and at a certain point in the future that may allow for an expansion of the site and a revenue stream. We love following the markets and sharing our insight as best we can to try to help others. Terry has some specific ideas on the direction the site can take but this will need to evolve over time.

    Comment by Jon — January 28, 2011 @ 4:30 am

  13. Just look at the chart – GBB is completely within its normal trading patterns over the past year, trading right now just above the 100-day moving average and in a zone of strong support. Many investors typically get bearish and discouraged at exactly the wrong time. The smart money is jumping in now on GBB at current levels and I’ve picked up a bunch as well.

    Comment by Jon - BMR — January 28, 2011 @ 4:36 am

  14. Everton Resources (EVR) released results and the market responded negatively. This seems to be a pattern this month with news releases this month! Undoubtedly the correction in price of gold does not help but what was “missing” in the results. If the trend continues I am even nervous for Seafield’s (SFF) impending results. Gold Quest (GQC) has held up well in January and would perhaps be an appropriate switch from EVR.
    Thanks for all your great insight.
    Andrew

    Comment by Andrew — January 28, 2011 @ 4:47 am

  15. Today, GBB will be my choice to buy more… I am waiting for the unique chance 66 cents…. . Final boarding at this price, I hope this morning will hit this recent low.

    Comment by Theodore — January 28, 2011 @ 5:05 am

  16. Hi Andrew, the results from Everton were actually pretty decent—-they have a lot of work to do there, and keep in mind they have a large land package and as far as I know their drilling to date has been a fair distance (up to 10 km or so) from the actual Pueblo Viejo deposit. It’s a good story to keep following as I think it’s just a matter of time before they hit something very significant there. Of course coming out with results on a bad market day didn’t help. For the immediate future I’m more confident with Seafield as I believe the chart is better and keep in mind they’re drilling into known deposits with a sizable 43-101 resource at Miraflores and historical (non-compliant) resources at Dos Quebradas. Seafield also has nearly $20 million in the bank.

    Comment by Jon - BMR — January 28, 2011 @ 5:56 am

  17. Hi Andrea, Your question shows that you are thinking along the right lines. Many investors believe their first priority is “to make a profit”, but successful investors know that their first priority must be “to preserve their capital”.
    Now to answer your question.
    Here are a few basic rules you must follow:
    1. The trend is your friend. Believe it and follow it.
    2. Buy at or near support,sell at or near resistance.
    3. Believe that no pattern, indicator or system is infallible.
    4. Keep your system simple.

    You must become familiar with:
    1. Support and resistance levels on charts.
    2. Japanese candlesticks.
    3. RSI(14), keep the periods at 14.
    4. Volume.

    Let us walk through a typical scenario.

    You buy a stock near support and watch it climb steadily over a period of days, maybe weeks, when you notice the volume is getting larger. Then one day the stock moves up more than normal, volume is large and the RSI moves above 70%. This is the first warning that it is O/B.

    If the stock gaps up at the open on high volume and starts to decline the candle will be black….a good sign to sell.

    If the candle is red…. it could also be a good time to sell.

    If the stock is not moving up, just holding steady,and the volume is heavy….a good time to sell.

    Now look at quite a few charts and find the points that I have mentioned above. It will take a little time for you to develop your own system that works for you. But this is a start. Best of luck.

    Comment by John - BMR — January 29, 2011 @ 11:33 am

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