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So far, so good for Rainbow Resources (RBW, TSX-V) – our British Columbia “discovery play” – which is intersecting highly deformed quartz-mica schists (mineralization host) in early shallow drilling at its International Silver Property in the prolific West Kootenay region.    With just a few hours left in Friday’s trading session the company provided its first update on the recently started drill program ((it was a light volume day on the Venture, the news didn’t have much time to circulate).  The stock was trading off a penny at 23 cents before the news came out, but finished even for the day at 24 cents after a flurry of late buying swallowed up virtually everything that was offered through 24 cents.   The update was very matter-of-fact and businesslike, which impressed us, and signed off by Bob Morris from Moose Mountain Technical Services – RBW’s geological consultant.  Morris is highly respected in the industry and often errs on the conservative side.  This gave the news even greater credibility and what we found particularly interesting is that Moose Mountain has decided, at this early stage, to expand the number of drill site locations.  This is an important signal to the market, we believe, that Moose Mountain likes what it sees so far.

The accumulation in Rainbow over the last few weeks has been impressive, and the chart pattern is pointing to the strong possibility of a powerful breakout once the .24-.27 cent area is cleared.  The stock successfully tested its EMA-20 Friday and what’s really interesting at the moment is that its 100-day moving average (SMA) is just beginning to reverse to the upside (the 50, 200 and 300 are all rising) which should add fresh fuel to the fire.  Rainbow has significantly outperformed the Venture this year (a gain of 45% vs. a loss of 14.5% for the CDNX year-to-date).  With the Venture in an apparent new uptrend, John’s Fibonacci levels for RBW seem very reasonable (his Fib. levels for GoldQuest were remarkably accurate.  With RBW’s modest current market cap of $8.5 million, a major hit at the International would obliterate those Fib. levels).

GoldQuest Mining (GQC, TSX-V)

Some investors were thrown into a state of panic last Wednesday when GoldQuest suddenly plunged from an intra-day high of $1.92 to an intra-day low of $1.55 before closing at $1.60.  This could only be considered as a very normal pullback, very similar to the retracements witnessed in June and July.  GoldQuest had become temporarily overbought, so some profit-taking kicked in.  As simple as that.  The support zone held between $1.50 and $1.60.  Given results to date, GoldQuest is sitting on a major discovery in the Dominican Republic and for that reason is a “keeper” in our view.  Who knows where this stock could go in a stronger overall market through the balance of the year if stellar drill results continue to pour in.

GoldQuest perked up Friday, closing at $1.71, and the overbought condition has cleansed itself with RSI now at previous support.  A higher close Monday will confirm a new bullish wave is underway.

Note:  John and Jon both hold share positions in Rainbow Resources with Jon adding to his position Friday (Jon also holds a share position in GoldQuest).