Mining for Winners in Any Market

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Silver Making Triple Top Breakout

In Market Analysis on September 3, 2010 at 6:37 pm

Point and figure charts are one of the oldest and purest charting methods in the field of technical analysis.  Point and figure charts are not commonly studied and practiced by technicians today as in the past.  However, I use it as a simple indicator of areas of supply and demand and to indicate new trends.  Warren Buffett said, “There seems to be some perverse human characteristic that likes to make easy things difficult.”  Especially in the field of technical analysis, analysts seem to love making complex formulas when in reality it is completely unnecessary.

Point and figure charting is a simple method of plotting price alone.  It helps the chartist understand support, resistance and specific congestion areas.  Congestion areas are areas of price where there was a previous battle of supply and demand.  Often times when the price reaches this area it is difficult to break through. However, when the breakout does occur a major move begins.   These charts are excellent at identifying specific price and relative strength breakouts.

Silver has just made a triple top breakout which signifies a possible major trend higher.  Triple top buy signals are very powerful and hint at a move higher.  Unlike bar charts projections are based on a horizontal count rather than vertical.  This silver triple top breakout which may occur shortly could initiate a rise to $27.  This target is also confirmed by the bar chart analysis which I showed on Sunday’s update. On the point and figure relative strength chart a breakout has already occurred.

Usually relative strength breakouts precede price breakouts and confirm the move higher.

Never in history has the gold to silver ratio been so high and a reversion to the mean could mean a significant move in silver.

Disclosure: Own silver and silver mining shares.

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Breakout in Precious Metals, Pay Attention to High Quality Explorers

In Market Analysis on August 31, 2010 at 6:38 pm

The global debt crisis and the war on deflation by the Federal Reserve is causing precious metals to approach a key resistance level.  Gold is nearing a 52 week high while silver is close to breaking $19.  A break above these levels on high volume could be the beginning of a major move higher.

Gold and silver has been a safe haven asset.  Many concerns were expressed if miners would collapse in a weak equity market.  However, since the last Federal Reserve meeting, gold and silver has shown impressive relative strength compared to the overall market. The Federal Reserve discussed the increase of treasury purchases to keep interest rates artificially low. They also made it clear that every attempt will be made to prevent deflation.  This low interest rate environment and weak economic outlook which may continue for some time has encouraged investors to move money out of equities into safe haven assets such as gold and silver.  Gold and silver is also gaining interest as investors are realizing bond yields are too low and may be risky at these level.

The Fed’s greatest fear is deflation, high unemployment and a move into new lows in equities before the election.  If the S&P continues to deteriorate and unemployment data comes in negative, I expect an announcement of more central bank interventions to reflate the economy.  This next round of quantitative easing could cause a massive rush into gold and silver.

Many are concerned of the safety of fiat currencies during a global debt crisis.  The global economy is built on spending and investing.  Many investors were concerned if a downturn in the equity market would drag down junior miners.  These past couple of weeks have proved that is not the case.  Junior miners have made major moves higher.  A breakout into new 52 week highs in the miners is highly probable especially as the price of bullion breaks out.

The saucer (cup) and handle pattern is the chart reader’s favorite pattern.  Great performing stocks tend to have a strong base before an extended move.  Gold’s (GLD) pattern is very rare and this setup tends to be very profitable.  Similarly to what we saw in September of 2009, I expect a major breakout.  Is this pattern showing investors that a major event may be brewing?  Time usually tells the tale as news or events are announced after the breakout.

High quality gold and silver explorers are making major moves already.  It is important to pay attention to the gold and silver junior miner sector as we may be setting up for peak gold and silver.  High quality explorers with mineable assets should be followed as gold and silver discoveries are rare and producers are paying a premium for these properties.  These miners tend to have great leverage to the price of bullion especially if we see more government interventions and quantitative easing.

Yesterday, Fronteer Gold, a stock that I have recommended to my readers bought out Auex Ventures to control completely the Long Canyon Project.  The Long Canyon discovery is high grade and open pit. Fronteer is consistently coming out with impressive results from this project.  Long Canyon represents continued resource growth as it is expanding and open in all directions.

A major move in bullion could cause these explorers to make large percentage gains.  If you haven’t researched high quality junior miners yet, now is the time before a major move.

Disclosure: Long Gold and Silver Miners

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Gold Miners On Verge Of Major Breakout. Cup and Handle Pattern/Ascending Triangle.

In Market Analysis on August 27, 2010 at 7:09 pm

The global debt crisis and the war on deflation by the Federal Reserve is causing more producers to find ways to invest their cash.  This low interest rate environment which may continue for some time will force producers whom are sitting on large cash positions to acquire more reserves.  Mergers and acquisitions in the mining sector have increased over this past year due to a lack of major discoveries as well as supply and demand changes in emerging economies.

We have seen a trend of investments from Asia to purchase stakes in mining companies.  In 2009 the Chinese Investment Corporation, a state owned company, took large ownership positions in Teck Cominco and Penn West Energy Trust. Recently in June, China National Nuclear signed a contract with Cameco to supply 23 million pounds of uranium.  Hanlong Investments took a large stake in General Moly, one of the leading North American molybdenum developers.  Korea Electric Power signed a deal with Denison Mines another uranium developer. Sojitz bought a 25% interest in the Taseko’s Gibraltar Copper Mine. Then recently we saw BHP Billiton trying to make a deal with Potash Corp. and Kinross, a large producer buying Redback, an exploration company.  This trend should continue through 2011.

Investors should be studying the companies that are receiving premiums and position themselves accordingly to make potentially large profits. Junior mining companies that are sitting on large assets that are still relatively cheap or overlooked should be considered.   There are still many companies with strong assets that are trading way below value.  This is an exciting and highly profitable time for the companies with assets close to production in the mining sector.

For producers it is more efficient to acquire explorers to replace their reserves rather than rely on their own exploration team.  I am focussing on the junior mining sector whom are close to production rather than the large producers as they will receive large premiums on their assets.

Following the mining sector on a daily basis the evidence of keen interest to acquire resources is apparent.  There is a search for real assets and natural resources.  Foreign countries are looking for natural resources to diversify their holdings and supply their emerging economies. Large mining producers are searching for replaceable reserves of gold, silver and industrial metals.  As the U.S. attempts to reflate their economy at all costs, precious metals and natural resource assets should receive a premium.

The Gold Miners are close to a major cup and handle breakout.  It also appears to have set up an ascending triangle pattern.  A breakout from this pattern could lead a major move into new high territory.

The strong trend in gold miners is signaling that interest rates will stay low as the Federal Reserve makes every attempt to reflate the economy.  Precious metals prices should stay high which would make producing mining companies highly profitable.

Disclosure: Long Gold and Silver Mining Stocks

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