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Unlike most junior Gold stocks, GoldQuest Mining (GQC, TSX-V) is enjoying a strong month of January (up 15% through yesterday) and its chart is as bullish as ever.  This is particularly impressive considering the company announced December 24 that it was accelerating the warrant expiry date from a financing last April.  The new deadline to exercise those warrants was two days ago (9.5 million were outstanding as of Dec. 24 with each warrant exercisable into one common share at 20 cents).

GoldQuest’s fundamentals are exceptionally strong as we have stated many times.  This is a well-run company with a very real opportunity to make a major discovery in the mineralization-rich Dominican Republic where it has been exploring for a decade.  GoldQuest is currently drilling its La Escandalosa Project (formerly Las Tres Palmas) which has the potential to develop into a company-maker.  An initial NI-43-101 resource calculation, based on just 25 holes from one area of that property, revealed an inferred resource of 400,000 ounces of Gold as announced in November.  That figure could increase dramatically moving forward.  The 43-101 was done at an early stage.

La Escandalosa is an outstanding target.  Gold at this property 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.

GoldQuest has a pipeline of promising advanced and early stage properties in the DR, including more 43-101 resources, along with a significant zinc-lead-silver deposit in Spain.  As of 7 am Pacific today, GQC is trading at 39 cents – down 3 pennies.  It started weak yesterday and finished strong.  Embracing any weakness in this stock recently has been a winning strategy. Below, John updates the technical picture for GoldQuest:

John: Yesterday, GoldQuest Mining opened at 37 cents, its low, and then climbed and closed at its high of 42 cents for a gain of 3 pennies (7.69%) on CDNX volume of 558,000 shares. This indeed was the star yesterday in the BMR group, having a breakout above resistance on a day when the CDNX was down nearly 50 points.

Looking at the 4-month daily chart we first look at the most important part of any chart which is the trading pattern. We see that between November 23 and yesterday, the pattern is a bullish ascending triangle (blue line top, green sloping trendline and the vertical black dotted line). Yesterday’s trading saw GQC get through the horizontal blue resistance line at 40 cents with the stock closing strongly at 42 cents.  The candle is white and shaved,   also indicating trading was strong at the close. The volume of 558,000 was an increase over Monday’s 400,000, another bullish sign which also helps to validate the breakout. This breakout must be verified by a white candle and increased volume. The SMA(50) moving average is providing bullish support.

While the fundamentals suggest GoldQuest has an excellent chance of a major discovery in the Dominican Republic, which means the stock has good potential to ultimately soar to new all-time highs, where can we expect the price to go from here in the immediate future?  Technical analysis states that one can estimate the next major resistance level by adding the depth of the triangle (black dotted line) to the top of the triangle (blue resistance line).   Thus, resistance line @ 40 cents  +  depth of triangle (40c – 25c)  =  40 +15  =  55 cents.

There is, however, a support level at 32 cents which, with the blue resistance line, forms a horizontal trend channel within the triangle. This is not shown so as to avoid congestion. This too can be used to estimate a minor resistance level which could occur when the depth of the channel is added to the blue resistance line.   Thus, resistance line @ 40c  +  (40-32)  =  40 + 8  = 48 cents. This is in agreement with the Fibonacci target of 47 cents shown on the chart of Jan. 13.

In summary, we can expect this breakout, if confirmed, will initially climb to 48 cents and then to 55 cents (these are theoretical Fibonacci levels based on technical analysis and not BMR price targets as we don’t give price targets).

Looking at the indicators:

The RSI at 66% has has made a strong move up from a “W” formation – very bullish. The Chaikin Money Flow (CMF) indicator is very bullish as it shows buying pressure has increased in each of the last 4 sessions. The ADX trend indicator has the +DI (green line) at 26 and above the -DI (red line) at 17 and diverging. The ADX (black line) trend strength indicator is low at 17 and starting to turn up – this is a very bullish orientation.

Outlook: GoldQuest is in a very bullish state with chart patterns and indicators in agreement that this breakout is genuine.

Note:  Both Jon and John hold positions in GQC.