John: On Friday, Gold Bullion Development (GBB, TSX-V) opened at 77 cents, dropped to a low of 75 cents and then surged to a new all-time high of 83 cents. It closed at 81 cents for a gain of 4 pennies on CDNX volume of 1.1 million shares. GBB’s chart patterns are very bullish as outlined below, so there’s a decent chance this stock could close the year in powerful fashion.
Looking at the 6-month daily chart, we see that on Friday GBB broke to the upside to a new high of 83 cents without meeting much resistance at the old high from September of 79 cents. On Thursday it made a breakthrough as it surged through a main resistance level at 74 cents on nearly 2 million CDNX shares. The previous 74 and 79 cent resistance levels now provide strong support (green horizontal lines).
If we consider the chart pattern between Sept. 8 and December 8 a “Cup with Handle”, with the breakout from the handle Dec.9, we can expect the next resistance level to be 95 cents (top level of cup + depth of cup = 75 cents + 20 cents = 95 cents) which agrees well with the Fibonacci target of 97 cents (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). The EMA(20) provides close bullish support.
It is also important to note there has been a significant increase in volume over the last 3 trading sessions.
Looking at the indicators:
The RSI is rising and now stands at 73% – bullish.
The ADX trend indicator has the +DI (green line) rising at 36 and above the -DI (red line) which is falling at 12. The ADX (black line) trend strength indicator is at 30 and increasing. The vertical thin green line shows where the +DI crossed above the -DI. This is where the bullish uptrend began. The orientation of ADX, +DI and -DI is very bullish.
Since November 8 there has been a continuous increase in buying pressure (upsloping mauve line) with Friday’s Chaikin Money Flow (CMF) indicator closing at .378. It is very unusual to have such a long continuous increase and this is very bullish.
Outlook: The chart patterns and indicators are very bullish for GBB and suggest the stock could aggressively continue its climb toward the next Fibonacci target of 97 cents.
Note: The writer holds a position in GBB.
I see that investor sentiment is 57% bullish, thats about as high as it usually gets before a big correction! http://schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx
Comment by danny — December 19, 2010 @ 4:51 am
Very interesting the analyse you’ve done about the “cup with the handle”. When the situation is possible, you can predict the next level of resistance by top level of cup + depth of cup.
Comment by Sylvain — December 19, 2010 @ 5:51 am
GBB will definitely try to hit the $1 mark in the remaining 8 sessions… Interesting to see the movement but this stock is worth to keep even though you may want to trade for profit taking at times. BMR’s analysis says its all. Thank you for your excellent work.
Comment by Theodore — December 19, 2010 @ 8:09 am
I still think most people haven’t grasped the full potential we have here with GBB. The original block model indicated around 2.5 ml ounces. Now extensions are being found in all directions and at depth. This is easily mined and begins at surface with good recovery rates and a 30,000 ton bulk sample already completed. Currently reserves as good as this in such a good area are commanding over $300 once they are proven up. It now looks we will have at least 5 ml ounces and possibly closer to 10ml. If we take 7.5 ml as an example and use the $300 per ounce it would give us a market cap of $2.5 bl. When you compare that with our current cap of $105 ml you can see what huge upside potential we have here. This has been a very successful story so far but its still very early days in a great success.
Comment by patrick — December 19, 2010 @ 8:26 am
There’s only one thing I regret regarding GBB, and that’s not “finding” it (and BMR) earlier. Got my first load of shares at 37cents, 7 would have been nicer though – ‘greed’
Comment by ungern — December 19, 2010 @ 11:25 pm