Canadian Gold Mining Outlook, Part 3

November 18, 1998

Ah, those incomparable Canadian junior gold mining stocks. Where else in these troubled financial times replete with deflation, volatility and falling prices can one find such comfort, such joy, such amazing profit potential for so little? It is absolutely amazing to us that no one besides Gold Strategies Review have picked up on this (though the other precious metals and investing newsletters are just now starting to give this sector some coverage—long after the profits have been made by our readers).

A cursory glance at the charts for these stocks will make even the most seasoned technical analyst salivate. Almost to a company, they all show strong bottom formations that portend higher prices in the weeks and months (and for some, perhaps, years) ahead. This is one stock market sector that the Wall Street analysts have completely ignored (largely because of their known anti-gold bias) and for that we can thank them. Because of the low profile given most of these stocks, there has been little interest in owning shares in them, and hence, shares can be bought at bargain basement prices. But the prudent investor must act now because certain financial media are starting to pick up on the impressive movement within this sector of late and before too long everyone will want to be on this bandwagon (at which time our readers can safely exit with huge profits).

At the expense of boring our readers, we want to pat ourselves on the back once again for being the only publication (besides Talking Gold with Wil-Arm) to point out the amazing potential in one stock alone—Argentina Gold. Readers who took our advice and bought this stock last month when it traded at less than one dollar per share on the Vancouver stock exchange got to enjoy an explosive rise in share price to over $3.50/share (a rise of 400%). All of this within a couple of weeks of our highlighting this stock. And you read it right here on Gold-Eagle.

Now, of course, nearly every gold stock newsletter is writing about ARP now that the profits have largely been made. The same could be said for our coverage of Winspear Resources before they made our readers a nice profit. But we don't won't to bore you further.

Now that we've broken our arm patting ourselves on the back, let's get to the nitty-gritty of our analysis. What follows is a technical/chart pattern analysis of several Canadian junior gold mining shares that—while maybe not quite as potentially profitable as the last group we analyzed—has a definite potential to make money for investors in the very near future. As always, we give credit to WIL-ARM (E-mail: [email protected]), the authority in the Canadian gold mining stock sector, for the charts we will analyze.

Aber Resources Ltd. shows a distinct near-term bottom formation that has found strong support at approximately $5/share. Its Relative Strength Indicator (RSI) shows positive divergence from its price chart. It also just recently broke above its moving average. This stock has seen a huge decline (as have nearly all the Canadian golds) from 1997 to the present but seems ready for at least a near-term rally. Investors looking to catch a quick profit may want to jump on board this one before it's too late. Our immediate profit target is overhead resistance at approximately $13/share.

Agnico-Eagle Mining is another stock which shows bullish technical divergence in its RSI. The stock is presently consolidating in what appears to be a bullish half mast formation and this would seem to project a minimum price target of $13/share (from its current $8/share). The stock is supported by its moving average and has underlying chart support at $5/share. Any violation of this level means that investors should exit positions in this stock immediately. As long as the low-volume consolidation continues at the $8-$10/share level investors should consider buying this stock with a near-term profit target of $13/share.

Aur Resources shows an ongoing consolidation formation in its chart that looks like a shallow "flag" pattern. The stock currently trades at $3/share and we view $4/share as a very real possibility over the next few days-to-weeks. If this level can be cleared, the next resistance is not until $6. Its RSI is currently pointing up. Not a definite buy right now but a consideration.

Aurizon Mines has the kind of chart pattern and technical action we like to see in a stock. In fact, it is quite similar to the technical conditions we observed in Argentina Gold in recommending it last month prior to its 400% takeoff. Right now the stock trades at around $0.50/share. Its RSI shows bullish divergence from the price chart. The price chart shows a strong near-term bottoming pattern with strong support at the $0.5/share level. Most impressively, this stock is slowly coming out of a falling wedge formation and this is exactly the kind of pattern you look to buy from. Our advice: get this stock now while it trades below $1/share.

Cambior Inc. shows a strong bottom formation at around the $3/share level with an up-pointing RSI—a bullish pattern. Prices have tested support three times and each time has seen a failure to penetrate the lows. This is positive. High-risk speculators may wish to accumulate this stock at current prices with a near-term price target of $10/share (nearest resistance) in mind.

Another Canadian gold stock with a strong bottoming formation is Novagold Resources, which appears quite clearly to have bottomed at underlying support at $0.5/share. In fact, a case could be made that a head and shoulders reversal pattern has been etched out on its chart—it certainly resembles one. If nothing else, the old Edwards & Magee "rule of three" (where a failure of three successive tries at penetrating support leads almost invariably to a turnaround) could safely be applied here. The RSI for Novagold looks good and this stock looks ready to sail for higher levels. Next resistance of consequence is $2/share.

Finally, we bring to your attention Kalahari Resources which trades at a current $0.5/share. Like no other Canadian golds chart we've seen, this stock's chart has a very strong support at the current $0.5/share level and literally has nowhere to go but up from here. Already, the stock shows signs of a bullish bias. Its RSI is also starting to turn up. A steal at its current level with an expected near-term price target of $1/share.

Clif Droke is the editor of the three times weekly Momentum Strategies Report newsletter, published since 1997, which covers U.S. equity markets and various stock sectors, natural resources, money supply and bank credit trends, the dollar and the U.S. economy.  The forecasts are made using a unique proprietary blend of analytical methods involving cycles, internal momentum and moving average systems, as well as investor sentiment.  He is also the author of numerous books, including “2014: America’s Date With Destiny.” You can view all of Clif's books here. For more information visit www.clifdroke.com.

Pure gold is so soft that a strong man can squeeze it and shape it.

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