daytrades may 10 pre-marlet, page-2

This Weeks Picks Despite the turmoil on global markets I plan to keep preparing my weekly post but will focus only on stocks with strong fundamentals and the likelihood of very positive news in the near term. Normally I would include stocks which look strong technically and could therefore present good trading opportunities but might lack strong fundamentals. In this market I will not be taking a risk on such trades. The reason for this is that stocks with strong fundamentals should be the ones which recover fastest when the markets stabilise or begin rising again.

Market Direction: What a week it was. The markets put in its worst performance since we were in the midst of the GFC. So where to from here? The Australian market is clearly oversold however my personal opinion is that there is likely to be more downside in the near term. During the past year I have been constantly looking out for potential catalysts that might create a second crisis or a "GFC2". I now believe the likely cause will be problems which are now beginning to surface in the EU and their potential impact on the global economy and its growth prospects. Should other EU countries like Portugal or Spain declare that they need help in the form of a financial bailout, the markets are likely to head much lower. Large brokerage houses and hedge funds can probably smell blood and for this reason we are likely to see fiscal problems in other EU countries come to the surface. Look out below if that happens.

Retail sales for the US in April come out on Friday this week which will be a good indicator on whether the economic recovery is gathering further momentum in the second quarter of 2010. Other key data out this week includes:

AUD ANZ Job Advertisements Monday 11:30am
GBP Asset Purchase Facility Monday 9:00pm
GBP Official Bank Rate Monday 9:00pm
CNY CPI Y/Y Tuesday 12:00pm
GBP Manufacturing Production m/m Tuesday 6:30pm
AUD Federal Budget Tuesday 7:30pm
AUD Home Loans m/m Wednesday 11:30am
EUR Preliminary GDP q/q Wednesday 4:00pm
GBP Claim Count Change Wednesday 6:30pm
USD Trade Balance Wednesday 10:30pm
AUD Employment Change Thursday 11:30am
AUD Unemployment Rate Thursday 11:30am
GBP Trade Balance Thursday 6:30pm
USD Unemployment Claims Thursday 11:30pm
USD Core Retail Sales Friday 10:30pm
USD Retail Sales Friday 10:30pm
USD Preliminary UoM Sentiment Friday 11:55pm

With regards to the charts I have decided to leave the full sized charts in the post because the text in my roundup for each stock makes specific references to the charts and I believe it is easier to understand my thinking if the full sized image is available whilst reading my comments as opposed to switching to the thumbnail later. If enough people want me to convert to thumbnails in the future then I'll do so.

CVY: With gold rising strongly last week and a JORC resource of more than 1m ounces at the Cameron Lake project I believe CVY is very undervalued in the current climate. The recent completion of the $10m placement at 22 cents ensures the company is well funded to carry out an extensive drilling program starting in mid May. Conceptual studies into underground mining are likely to highlight potential for the project to generate further value for shareholders. It is good to see that Macquarie Corporate have just joined the register with a 9% share of the company, presumably through the placement. They may have been introduced to this opportunity due to the fact the same person chairs both the OVR and CVY boards (Macquarie bought 16% of OVR in a placement earlier this year). News Due: Conceptual studies into underground mining at Cameron Lake. Commencement of 15-20,000 metre drilling campaign at the Cameron Lake Project. Price Target: 25 cents once 22 cents gets broken followed by 30 cents. Support is at 20 cents. Disclosure: Holding CVY



SVL: With the funding for the next round of drilling now finalised at 8.5 cents the next important news will be the assay results from hole RC076. These are due back from the lab as early as this week so I expect interest to pick up. I note a golden cross occurred on the chart last week which could be a prelude to significant share price appreciation. Given the volume of trading on the last significant results announcement (21st April, 2010) I believe the register here is somewhat loose and therefore the stock may have some work to do before larger sustainable price rises occur. News Due: Lab assay results from hole RC076 at the Webbs Silver Project in NSW. Price Target: My initial target assuming good exploration results is 14.0 cents. Resistance is now at 9.0 and 10.0 cents, support is at 8.0 and then 7.0 cents. Disclosure: Holding SVL



PNX: PNX remains on my list this week because assay results referenced in the quarterly are due any time. Clues given to date suggest some very good results are likely and given they are close to the surface the market should have a good reason to get excited by them. Volume needs to pick up before I would say that day traders will be attracted but there should be a good trade in this very soon with potential for the share price to move into blue sky. Macquarie Institutional continues to buy shares on the market. The Bollinger bands on the daily chart have tightened considerably which is often a precursor to a substantial move, be it up or down. Based on an expectation of positive news, I expect this to be a breakout to the upside. News Due: Assay results from drilling at the Princess Royal Copper Project where inspection of the core has revealed several spectacular intervals of visible copper very close to the surface. Price Target: Resistance at 20 cents needs to be broken. My initial target is 22 cents, followed by 24 cents and then blue sky. Disclosure: Holding PNX



ARX/ARXOA: I have been accumulating ARXOA over recent weeks because I see potential in their gold projects in Indonesia. The biggest issue with the company at the moment is that ANZ own about 48m shares and have been selling into strength in the market, although they don't seem to be aggressively selling at prices below 4 cents. It is clear that until they are removed from the register the price is unlikely to appreciate significantly. I am starting to see some positive signs in the chart including the positive divergence in the MACD histogram and tightening Bollinger bands which tend to occur before breakouts. Some very good results could result in a period of high volume which could provide ANZ with an opportunity to exit the register. News Due: Results from drilling at the company's Projects in East Sumbawa. Price Target: Resistance lies at 5 cents and the price is unlikely to pass this level until the ANZ are finished selling. Support is around the 3.3 level. Disclosure: Holding ARXOA



GDN: GDN put out a good announcement on Friday morning and whilst it took a while for the market to respond it did eventually marking up the shares by 0.5 cents to a close at 5.1 cents. Fracturing operations at the Paradox Basin #3 well are due to start this Friday which should lead to a substantial increase in interest in the stock. There is positive divergence to price on the MACD histogram which is a positive sign. I would not be surprised to see the MACD signal line turn up as early as today and head for a cross. I'll be watching for that to occur over coming days. News Due: Test results from the Paradox Basin #3 well in Utah and Colorado. Further flow results from the work over of the Paradox Basin #1 well. Price Target: My initial target early this week is for a test of 5.5 cents, possibly as early as today. Support lies at Resistance is at 5.5 cents and then 6.0 cents. Disclosure: Holding GDNOA



Good Luck with your trading this week.