CDNX And Overall Markets
The Venture Exchange declined for the second straight week but outperformed the major markets, declining only 2.7%. The TSX was off 2.9% while the DJIA was down 4.1% (the TSX Gold Index dropped 4.5% this past week and fell below its 200-day moving average for the first time since last October, just before a major move to the upside).
Over the past 34 trading sessions the CDNX is up 86 points or nearly 6%. During the same period, gold is off $135 or 11% while the TSX Gold Index has plummeted a whopping 19% and is clearly in oversold territory. This strong divergence between the CDNX, gold and the TSX Gold Index is, in our view, very significant (it is the opposite of the divergence we saw in July, 2008, before commodities crashed). Given the consistent reliability of the CDNX in predicting major moves in gold and commodities in general, we can only conclude that now is the time to be scooping up good quality juniors that may have pulled back in recent days as a major move to the upside in gold appears imminent. That’s not to say gold won’t test strong support just above $1,000 in the near future, but a monster run to the upside appears to be in the works. Any downside move in gold from this point should be considered a head fake and an incredible buying opportunity.
The CDNX remains in a firm uptrend (a parabolic one at that). We liked the action we saw Friday when the Index fell below its 20-day moving average to 1534, and then reversed course to the upside (going in the opposite direction of the major markets) to finish at 1,550. The CDNX fell slightly below its 20-day moving average in both December and October, so this fact is not something that really concerns us. We would only be alarmed if the CDNX’s 20-day moving average began to decline – it has remained in an uptrend since July of last year. For that trend to continue, we’d have to see the CDNX get back to the 1,600 level or new highs by the first week of February – and we have every reason to believe that’s exactly what’s going to happen.
In terms of the major markets, we wouldn’t be surprised to see a Monday morning sell-off followed by an intra-day reversal which would signal the end of this current correction.
BullMarketRun.com Portfolio – We Survived The Week!
Gold Bullion Development (GBB, TSX-V)
Gold Bullion Development backed off slightly this week. It found strong support at .095 and closed at .105, down one-and-a-half cents on the week (up 40% from when we initiated coverage). Initial assay results from last month’s drill program at the Granada Gold Property near Rouyn, Quebec, are expected soon – we were disappointed they weren’t ready for the Vancouver Resource Investment Conference but that’s the nature of the business. We remain extremely bullish on the prospects for Gold Bullion. Some further consolidation can be expected before the next leg up.
Seafield Resources (SFF, TSX-V)
Seafield continues to perform as expected and is finding strong support around previous resistance at 24 cents. We’re still waiting for the announcement regarding Seafield’s Colombian gold property acquisitions through Caribbean Copper and Gold Corporation – we understand this process is in its final stages. Seafield closed down three cents on the week at 24 cents but it still up 300% from when we first introduced it (six cents) last summer.
Kent Exploration (KEX, TSX-V)
Kent had a volatile week with a range of .165 to .23. The action we saw Friday was technically bullish as the stock dropped as low as .165 (just half a cent above its 100-day moving average) before rebounding to close at the high of the day, .195. With a market cap of just $6.6 million, and an impressive portfolio that includes three flagship properties, we consider this well-managed company to be an exceptional value at current levels. Drill results from Flagstaff Mountain are overdue and could surprise the market in a big way.
Greencastle Resources (VGN, TSX-V)
Greencastle had a fairly quiet week, trading just 250,000 and closing at .165 (down half a cent from the previous week). With a market cap of just over $7 million Greencastle is trading only marginally above its cash value. The company started drilling some test wells at Boggy Lake-Cabri in southwestern Saskatchewan a couple of weeks ago, so news on that should be forthcoming fairly soon. This company has things we really like – cash, oil and gold. This is a great little stock to just sit on and wait for an explosion to the upside – the downside risk at current levels is minimal, and the company has regular monthly cash flow of about $150,000. Their new oil properties in Saskatchewan hold considerable promise.
Richfield Ventures (RVC, TSX-V)
Richfield was unchanged on the week at $1.12. The market is still absorbing a bunch of cheap private placement stock from last fall, and this may continue for a while yet. As a result we wouldn’t be surprised to see Richfield test support at .90 cents before firming up again. Having said that, this company appears to be sitting on a very substantial bulk tonnage gold deposit in the interior of British Colombia. Once this cheap stock is eaten up and drilling resumes this spring at Blackwater, we expect Richfield to be a star performer.
Colombian Gold Mines (CMJ, TSX-V)
Colombian was off 11 cents for the week at .89 but is still ahead 48% from when we first initiated coverage early last month. CMJ has an impressive and large portfolio of grass roots exploration properties in Colombia, and will soon be drilling its Yarumalito Property.
