daytrade diaries... november 16, page-5

There are still good reasons to be cautious in this market. After such a strong and long rally the question we should all be asking is do the fundamental signals about the future of the global economy justify such a move up. Whilst I think we went too low in March I am starting to feel that we are now close to the other extreme. I have mentioned it here a few times before but I firmly believe that the US is headed for a double dip recession starting in 2010 and if this occurs then their stock market is likely to fall significantly again. Hence I keep a close eye on leading and lagging indicators about the US consumer. Friday night gave another warning signal with Consumer sentiment coming in far lower than expectation, and the market rallied. Tonight we have the all important US retail sales for October so this will set the immediate tone for the market this week. A poor number will create a very nervous atmosphere for investors.

Whilst I don’t plan to abandon the market I will continue to be vigilant and ensure that I only keep long term position in companies with strong fundamentals that can withstand turbulent times. The three key ingredients I look for are credible management, exceptional project potential and large reserves of cash sufficient to fund a long period of activity without the need to go to the market for funds.

Todays Picks
BCC/BCCO: After Fridays performance I need to revise my pre spud target of 10.5 cents because it will be exceeded (I now expect 15 cents). The drilling of the Lee County well is scheduled to start in 9 days and, with a high probability of success, there is likely to be further for BCC shares to run in the short term. I bought some BCC on Friday morning at 8.7 cents and went out for a long lunch only to come back and find the price at 9.6 cents. I was almost certain that the price would reach 10.5 later in the day and it did I decided to sell the shares at 10.5 cents for a nice profit but I am still holding options until results come out. News Due: Confirmation of production ramp up at Pompano well to 6-7 mmcf/day.

MHM/MHMO: Still we must be just about through the placement stock by now so I expect a very strong week for MHM/MHMO. I would be surprised if we don’t get news this week and if it comes it should propel the stock towards its previous highs and onwards into the 40’s. News Due: Completion of the acquisition of the Aluminium Salt Slag plant and progress on the establishment of a silica plant in Tasmania.

ADN: The selling pressure doesn’t seem to be increasing despite the SPP stock now sitting in peoples accounts. I still haven’t bought but have entered my first order onto the screen at 24 cents. Hopefully I will be able to build a reasonable sized holding over next two weeks. News Due: Assay results due in early to mid December from the diamond drill hole at Rover 1 next to Westgold resources discovery. Indications are the grades will be very good.

MEU: Yet another good announcement on Friday about exciting exploration targets at the Melton project failed to move the market. We should see an exploration update for Junction Dam this week and if the results continue to be positive momentum might finally come. The SPP closes tomorrow and, to be honest, I hope not too many have been taken up so when people finally begin to see value here, the on market buying will be stronger. News Due: Further exploration results from Junction Dam (Close to the Honeymoon uranium mine). Exploration plan for Melton.

ARM: Managed to hold recent gains on Friday. With an international road show underway we can expect to see some offshore buying appear over coming weeks which should provide additional support. It is my view that an attempt on the all time highs of 65 cents is not far away. The chart still looks pretty good although the slow stochastic has crossed down and there are a couple of gaps at 46.5 and 49 cents. News Due: More sampling results from the company’s manganese project. Presentations to US, Canadian and European investors taking place over the next three weeks could add demand to an already tightly held stock (top 20 63% held). News Due: More sampling results from the Capricorn project.

NWE: I will be watching NEW closely this week because I believe a move is about to occur. Wednesday and Thursday saw a higher low achieved and Friday saw a small increase. The chart is signaling a change in direction might be about to occur with the MACD looking to cross in the next few days, the RSI rising and looking to break 50. For a look at the potential here I’d suggest that people read a post by Graynomad on the NEW “what is NWE worth?” thread.

Good luck this week.