Venture Update

After a 24% decline in 2013, preceded by similar losses in 2011 and 2012, the Venture Exchange is giving strong signals that 2014 is going to be a “turnaround year”.  In fact, the 3-year weekly CDNX chart that we’ve been tracking closely is downright bullish.

While many investors have been crying the blues about the junior resource sector in recent months, with some even giving up on this market entirely (a contrarian sign of an imminent reversal), the “smart money” has been accumulating high-quality issues – some of which could produce spectacular gains in the weeks and months ahead if the Venture remains on its current course.  Selectivity will be key.  As the Venture continues to heal and cleanse itself, in the midst of the early stages of a new uptrend, we’re sure to see an increasing number of rollbacks and even more issues (“lifestyle” companies predominantly) that simply disappear.  Good riddance.  The strong will survive and many of those will ultimately flourish.

Given the underlying bullishness of this chart, we have every reason to believe the Venture is on track for a major technical breakout through the 970’s, though exact timing of course is uncertain.

Key “takeaways” from John’s updated 3-year weekly CDNX chart:

• Note how the Venture in late October finally broke above a long-term downtrend line which since then (importantly) has held as support.  The Index is now accelerating to the upside after successfully testing that support again in December in an environment of a falling Gold price and tax-loss selling pressures;
• Note the impressive RSI(14) uptrend in place since the beginning of last summer.  This is different than anything witnessed with regard to the RSI since the Venture bear market began in early 2011;
• Note how the Venture is now outperforming Gold for the first time since 2011, another very positive sign (for both the Venture and Gold).  The Venture topped out in March, 2011, six months ahead of Gold’s high.  Likewise, the Venture (a reliable leading indicator) may do the same in reverse – in other words, it likely found a bottom in late June, 2013, perhaps 6-9 months ahead of a final low in Gold yet to come;
• Note the strong accumulation in the Venture since the beginning of July as shown by the CMF indicator – evidence of “smart money” accumulation.

The Venture closed above two chart resistance levels – 915 and 925 – to finish 2013 and is now resting just very slightly below its 100 and 200-day moving averages.  This is the closest the Venture has been to moving above its 200-day SMA since falling below it in early 2011.  The 100-day is beginning to reverse to the upside.  The 200-day could do the same later this quarter.  A critical resistance band exists between these moving averages and the 970’s.  Once the Venture is able to overcome the latter hurdle, it’s off to the races.

Investors who focus on companies with healthy balance sheets, clean share structures, strong management and geological teams, superior properties, and an overall determination to build shareholder value, have a unique opportunity at this particular time to take positions in stocks that could easily double or triple even in just the first six months of the year.

Check our Dec. 24 posting at BMR as we presented 20 special situations for our readers’ due diligence – one of those, Garibaldi Resources Corp. (GGI, TSX-V), has several immediate potential catalysts (see below) that could blast this stock out of the 2014 starting gate this month.  We’ll be going into more detail on other companies on that list in the days ahead, and potential new opportunities as well.

Garibaldi Resources Corp. (GGI, TSX-V)

Garibaldi has more than doubled since we first introduced it to our readers last June.  With a plethora of opportunities in B.C. and Mexico, from high-grade Gold to Copper to graphite, a strong working capital position (more than $3 million) and a skilled, focused management team, Garibaldi’s run is just beginning in our view.  As always, perform your own due diligence.  It’s one of the few juniors that’s had virtually no dilution in its stock since 2009.  This is management’s only deal (another rarity), and the company is even generating royalty income from a pilot coal program that has strong upside potential with graphite possibilities as well.

GGI’s Potential January Catalysts:

La Patilla

Ongoing drilling at La Patilla in Sinaloa State (Mexico) could lead to a discovery given the extent of near-surface mineralization (high-grade channel samples over significant widths and up to 38 g/t Au) outlined over parts of a breccia and a vein/stockwork system.  Geology, infrastructure, and local community support are all very favorable factors.  Artisanal miners have been productive at La Patilla for many decades, so Gold has already been extracted from there.  This property, never previously diamond drilled, has a great chance at being a winner.  It’s an easily manageable project for a company of GGI’s size and resources.  They’ve also already pulled off two coups with this property – by acquiring it at just the right time (on excellent terms) when Gold was collapsing in the spring, and by negotiating a long-term deal with the local community to advance La Patilla prior to when drilling commenced.  Wise management moves.

Iris Project

Carlos Slim, the richest man in the world (worth more than $70 billion) according to Forbes Magazine, is taking direct aim at a Gold discovery (Venus) within just a few hundred metres of Garibaldi’s strategically located Iris Project in Chihuahua State, Mexico.

Slim controls Minera Frisco which is carrying out a large exploration program at its Venus Property, contiguous to the eastern boundary of Iris.  There are two significant producing mines within just a couple of km. Garibaldi has “hot spots” on Iris that are now drill-ready.  The fact that Slim is in the middle of the picture here creates all sorts of possibilities, including a great market story, that could have important ramifications for GGI.

Tonichi Project

Gold, Cu-Au porphyry, Silver, coal, graphite – wide assortment of mineral opportunities with numerous targets throughout this large Sonora State land package and some assays pending.  GGI is also generating royalty income – pure profit – from a successful pilot coal program that has a chance to expand beyond coal to graphite. As Garibaldi reported in late September, “Sonora coal districts are favorable exploration targets for microcrystalline graphite deposits”, and the company has identified a “graphite zone” with more information including assay results pending.  We believe the coal is very high-grade, or there are massive amounts of it, given the royalty income GGI is earning.  Most microcrystalline graphite deposits are formed by contact or regional metamorphism of coal beds or other highly carbonaceous sedimentary rocks.  There’s clear potential for an imminent “graphite surprise” from GGI.

Grizzly Property

The Grizzly in the heart of the Sheslay Valley region is Garibaldi’s B.C. flagship property and a potential company-builder just by itself.   Multiple Cu-Au porphyry targets have been outlined over 15 km from Grizzly West to Grizzly Central, and an anticipated major update on this important project could come this month.  With the Grizzly, GGI controls the largest land position among juniors in the Sheslay Valley which could easily develop into B.C.’s hottest exploration camp in 2014.

Updated GGI Chart:

There are few companies on the Venture with such a favorable chart.  Not only are GGI’s moving averages in positive alignment, but a bullish flag has formed in recent months following a breakout above a long-term downtrend line.  The flag is underpinned by excellent support from a rising 200-day SMA and the 300-day which has flattened out (ending a decline) and appears ready to reverse to the upside.  Plenty of room for RSI(14) to move higher.  Explosive possibilities here.  Once the 15-cent level is cleared, GGI will run faster than a cheetah.

Given the recent increasing buy pressure, and based on similar patterns we’ve seen previously in other stocks, watch for a potential near-term breakout above the flag formation which should be accompanied by a major increase in volume.  The next Fib. level is 24 cents (not a price target, just a theoretical level based on Fib. and technical analysis).

To conclude, we’ll leave today’s last words on GGI to another writer and publication – Investor’s Digest of Canada has just come out with a very positive piece on GGI for its subscribers.  “The company has already scored some impressive successes, while husbanding the potential to morph into a much more compelling story,” stated Mike Kachanovsky.  “For speculative investors who want some action in the junior mining sector, Garibaldi is one name that deserves a look.”

Gold Chart Update

With Gold having suffered its worst annual loss – almost 30% – since 1981, investor sentiment regarding bullion is at multi-year lows.  From a contrarian standpoint, that’s encouraging to see.  After 12 consecutive yearly increases, a much-needed correction was both necessary and healthy.  We may not have seen the low in Gold yet but if we haven’t, it’s not far off, and a new uptrend could easily begin at some point during 2014. At the moment, a significant gap has opened up between the current price and the downsloping wedge, so conditions for a near-term rally certainly appear to be in place with a current trading range between the June low and about $1,300.  John’s 9-month daily chart also shows a possible double bottom reversal pattern.  In the big scheme of things, Gold’s long-term bull run remains intact and much higher prices should be expected by mid-decade.

Best wishes for a happy, peaceful and prosperous New Year from the team at www.BullMarketRun.com.  We’ll be posting our Week In Review And A Look Ahead on Sunday, followed by the resumption of our daily Morning Musings Monday.

Note: John and Jon both hold positions in GGI.