Market Direction: Positive jobs data from the US on Friday night is likely to lead to further optimism about the future direction of the global economy. This is likely to drive our market higher and given the XJO is so close to the 5,000 point barrier, I believe that this milestone could achieved this week. There is not a great deal of economic data coming out his week. The ISM Non- Manufacturing PMI and Pending Home sales both came in better than expected this morning which helped the DOW rise yet again and it is now within striking distance of the 11K level. Fed reserve chairman, Ben Bernanke, is due to give a speech titled Economic Challenges: Past, Present and Future in Dallas including questions from the audience. Apart from that there is the usual weekly unemployment claims data on Thursday at 10:30pm.
Sectors of Interest: I believe that gold is on the verge of breaking out into a new uptrend with an inverted head and shoulders pattern evident on the daily nearing completion (the right hand shoulder has nearly formed). The target on breakout would be around $1,230/oz. The price was up by more than 1% on Friday night and another 0.5% last night. Fridays news of NCMs takeover bid for LGL is certain to increase the level of interest in the sector with a focus on potential candidates for corporate activity. Therefore attention is likely to be reserved for those companies with substantial proven reserves and near term production potential.
CVY: Price action towards the close on Thursday was very positive and delivered a chart which looks bullish for the week ahead. The bollinger bands have started to expand thanks to Fridays rise. The slow stochastic is rising, the RSI has risen through 50 and the MACD is rising strongly and has crossed above zero. Positive news from the company would most likely result in a new attempt to break 25 cents and if this gets cleared then 30 cents is possible in the short term. News Due: Drilling results from the Ardeen gold project in Canada. Completion of the institutional component of the placement at 22 cents per share. Conceptual studies into underground mining at Cameron Lake. Disclosure: Holding CVY
PEN/PENOA: The stock has made what looks to be a double bottom on Thursday and is now looking quite bullish. The slow stochastic has crossed up, the RSI is rising and about to pass through 50 and the MACD looks set to cross this week. There is also positive divergence on the slow stochastic and MACD moving averages where they have been rising whilst the price has been falling over the past five sessions. With the initial JORC resource due out this month PEN could be a good performer over coming weeks. News Due: Further drilling results from the Ross project where 4 drilling rigs are currently operating. Initial JORC from the Lance project is due in April Holding PENOA
OVR: Activity in OVR looks set to pick up again with the commencement of the 2010 exploration season in Canada. The company is now cashed up with about $7.0m cash on hand or about 4.8 cents per share. That leaves an enterprise value of 2.8 cents per share or $4.1m for the Andrews zinc project based on last Thursday's close (current JORC resources 8.95mt @ 7.5% zinc equivalent which would deliver $174m in undiscounted cash flow. I have estimated that this would translate into an estimated $122m discounted cash flow using a 10% discount rate). The stock is very tightly held with the top 20 owning 75% of the company. Trading volumes over the past 5 weeks have been quite high with 12.6m shares traded since the beginning of February (Friday's volume of 2.9m was the highest since May, 2009). Given that the free float (outside the top 20 holders), is only 36m shares, that is substantial volume. Having watched trading closely I believe that a substantial amount of that volume has come from the one source so that means at least one or more of the top 10 holders must be involved in selling stock in some way. However, according to a recent top 20, the major holders have not sold one share. The recent increase in activity signals that a significant move in the share price might be near and given my valuation is around (4.8 cps cash plus 76.4 cps (discounted) for the current resource at the Andrews project) or $0.81 per share in total, the potential for upside here is obvious. I am accumulating more at current levels. News Due: Details of the exploration program for 2010 at the Andrews project in the Yukon, Canada. Disclosure: Holding OVR
DRM: The stock hit new highs on Thursday and finished close to the days highs which provided a bullish looking candle. I expect further gains today as people take speculative positions ahead of the next round of assay results. Given the run up since the initial results were announced I believe some caution needs to be exercised though. News Due: Further assay results from the remaining six holes at the Andy Well project in Meekatharra including MNRC006 which intersected sulphidised quartz vein from 41 to 46 metres with coarse visible gold. Disclosure: No Stock Held
GDN: Hopefully the market moves on from the placement at 5.2 cents (plus 1 for 3 free options) which was announced last week. Initial results from the interpretation of logs run last week should be released this morning and might provide some impetus for a short term rise however the time when people are most likely to speculate on GDN will be when testing operations are close. On the chart the slow stochastic and MACD are both falling and the RSI is flat. The uptrend which began three months ago is still intact but prices need to hold above 6 cents for that to hold. News Due: Logging results from the Paradox Basin #3 well in Utah. Disclosure: Holding GDNOA
OBL/OBLOA: The OBL chart shows that there is potential for further rises ahead. The slow stochastic has crossed up at about 50, the RSI is rising as is the MACD. After the initial rise following the announcement regarding the Canning Basin the stock retraced 66.67% of the initial rise and then bounced. A pennant formed last week and then on Thursday the price broke out again with a target of about 7 cents. News Due: Further progress on the Canning Basin project. Disclosure: No Stock Held
RED: With gold coming to life again and RED progressing with the development of the Siana gold project in the Philippines it is no great surprise that the stock is starting to attract interest again. With commissioning scheduled for January 2011 and the first gold pour three months later in April interest should continue to build over the remainder of 2010. The stock is now in an uptrend I also not that RED is now in the All ORD's index which should create further demand for the stock. News Due: Drilling results from Mapawa. Progress on construction of the Siana gold project processing plant. Disclosure: No Stock Held
BCN/BCNOA: The price has retraced by more than 20% during the past 8 sessions so there could be a good opportunity coming for a trade in BCN as speculation mounts about the next round of assay results. I'll be looking for an entry once I see some positive signals coming from the market and the chart indicators. Given gold is rising again I would not be surprised if that occurs this week. News Due: Further drilling results from the Barlee Gold project. Disclosure: No Stock Held
