Mining for Winners in Any Market

Posts Tagged ‘technical analysis gold stocks’

, , , , , , , , , , ,

Market Fails as Fronteer (FRG) Jumps On Long Canyon Discovery

In Stock Movers on August 19, 2010 at 8:41 pm

Get a FREE 30-Day Trial of my Members-Only Premium Stock Analysis Service NOW!

The S&P 500 broke out of a bearish rising wedge pattern last week after failing to hold the 200 day moving average four different times.    My bearish views were confirmed last week with a high volume breakdown after the Federal Reserve gave a sour report on the state of the economy.  Trading became highly volatile before the announcement.  In previously published articles, I warned that the Fed would ease and do everything within their power to flood the markets with cash, which has been bullish for gold and mining stocks.  The several gap downs on the S&P are hard to short as the market may rally to try to fill those gaps.    Although I have downside targets, I would look for a countertrend days to enter if going short.

Today’s break of the 50 day moving average was a key move as the probability of the 50 day moving average to cross the 200 day moving average to the upside is diminished.  Many were concerned that the bearish death cross would be a whipsaw, meaning markets would revert higher.  However, the bearish death cross is becoming more confirmed and pronounced as the 200 day begins sloping over.

Stocks key technical break today of the 50 day moving average on high volume shows there is little support as the risk appetite wanes.  The rally in treasuries are showing signs of a double deflationary dip, similar to the 2008 bear market as investors fear that the economy is on shaky grounds.

I believe that the chances of S&P moving into new lows are very high.   Today’s break of the 50 day moving average is confirming both the bearish head and shoulders pattern and death cross.

The S&P market action is demonstrating that the two day rally above the 50 day was not strong enough to maintain support.  Now the 50 day will once act again as resistance.  Volume did come in higher signaling major distribution. However, when a market transitions from a bull to a bear, each subsequent failure at the 200 day drives out the bulls who still believe that the decline is a buying opportunity.  After the third or fourth failure usually a full blown bear market begins.

Despite the Fed’s promise to amp up the struggling recovery by flooding the markets with cash and the latest jobs bill from Congress benefiting government and union employees, their major constituents, investors are losing confidence in Washington’s attempt to prevent another bear market.  I expect a breakdown into new lows over the next few weeks.

Despite all the weakness in the equities market, many mining stocks I am following closely are breaking out as gold is on its way to test new high territory.

Fronteer Gold which I have highlighted to my subscribers came out with their best drill results yet at their Long Canyon Project.  This project is being viewed as one of the great new high grade gold discoveries in Nevada.  These results in Nevada will be part of a new resource estimate on this project which should be a driving force for this company over the next few months.

, , , , , , , , , , ,

Relative Strength Signals Confirm Breakout in U.S. Gold (UXG)

In Stock Movers on June 24, 2010 at 10:59 am

El Gallo’s story is continuing to impress the mining community.  U.S. Gold has invested a lot of capital into drilling El Gallo this year and believe that by 2013 they can be producing up to 10,000,000 ounces of silver a year plus 35,000 ounces of gold.  This drilling program has been extremely successful.  They have expanded the mineralization and are now showing a potential to connect different zones to have one large shallow open pit mine.  In two weeks the initial resource estimate will be published which should add momentum to this gold and silver growth story.

UXG’s shares have significantly outperformed mining stocks and gold bullion this year.  Since our initial recommendation from last May, UXG is up close to a 100%.

Even though UXG at the moment has little institutional sponsorship other than the CEO himself, I believe the investment community is coming to realize that the company has an impressive growth story.  That has been highlighted technically over the past 12 months.  You are welcome to view archived posts where I have shown the incredible strength these past 6 months.

Since investing in the mining sector since 2001 I have found relative strength to be a key indicator of where capital is flowing.  It is easy to identify which companies are experiencing increasing demand compared to a benchmark.  Since I consider myself a miner of mining stocks, I spend hours researching the mining companies which have the greatest ability to outperform gold bullion and the mining sector.  Even in a great precious metals bull market one can underperform if not aware of how to use technical analysis and relative strength. 

This chart shows the relative strength of UXG to the gold and silver index.  Clearly the breakout to new 52 week highs is confirmed by its bullish strength.  The longer the outperformance of price and the confirmed breakout leads me to believe its growth story going forward. 

Using relative strength one can evaluate if this recent breakout in UXG is sustainable.  The chart above shows a major breakout for UXG confirmed by relative strength.  I believe that this stock can significantly outperform the sector over the next few years as did Goldcorp did from 2001-2005 while Mr. Mcewen was CEO. 

Over the past 6 months UXG has significantly outperformed Mcewen’s former company Goldcorp.  While Goldcorp is up less than 15%, UXG is up close to a 100%.  This further emphasizes how important it is to use relative strength to really profit in precious metals bull market.

Price volume action is excellent highlighted by the big volume breakouts.  I believe UXG is a great long term growth story.  New investors who want to get in should wait for a pullback as it is short term overbought.

, , , , , , , , , , ,

Buy U.S. Gold (UXG) Price Moving Higher After Cup and Handle Breakout

In Stock Movers on June 10, 2010 at 4:22 pm

The cup and handle breakout is a classic pattern which stock market traders search for constantly. A cup and handle pattern means that the stock has made a consolidation where many of the weaker holders sell their shares. Then as the stock breaks into new highs a handle is formed. It is formed because many investors who bought at the previous high are now trying to get back the capital that was initially invested at the previous high. Then a handle is formed. A handle should move sideways or slightly down so investors who bought at the previous high can get back their capital. Once this handle is completed the stock has very little selling pressure and buyers now gain control and push the stock into new highs. Many times the percentage gains are impressive.

Sometimes a stock forms a triangular pennant after a breakout as in the case of U.S. Gold (UXG). These triangular pattern in a handle are bullish and provide investors an opportunity to get in before a major run.

My ideal buy point is after the breakout of the cup when the handle pulls back to key support.  Right now is a good opportunity to add shares before a breakout at $4.31.

There are four upcoming events that could make this stock move.

1) 20 drilled hole results from El Gallo in 2 weeks.

2) El Gallo Initial Resource Estimate in 4 weeks.

3)Additional Results From Regional Exploration in 6 weeks.

4)El Gallo Economic Assessment by year end.

I am excited by the results coming out in mid July from the regional exploration.  UXG invested a lot into Mexico this year knowing that this land package could contain a massive amount of silver.  I am excited for the next few weeks both from a technical and fundamental perspective.