Gold: The Perfect Buy Point?

by JDH on August 17, 2019

Here’s the chart of NUGT – Direxion Daily Gold Miners Index Bull 3x Shares

Looks good to me.

Since the bottom in May and June, NUGT has more than tripled, from $14 to over $40 before settling in at $35.

The RSI is down to a favorable 52, the uptrend looks strong, so it would appear to be a good time to buy.

I made some purchases this week, but still have a lot of cash on the sidelines.  I will continue to deploy more cash this week in the $32 to $35 range, and see what happens.

There you go, short and sweet.

(And yes, I realize my speculation comments on Rubicon last week have not yet worked out; let’s see where we are in September when all of the traders are back, and we’ll make a final evaluation at that time).

More next week.

A Quick Speculation: Rubicon Organics

by JDH on August 10, 2019

Last week I did a deep dive on gold, and nothing has changed on that topic, so I will give you another quick speculation:

ROMJ.CA – Rubicon Organics Inc.  here’s the chart:

But wait, you say, that’s a horrible looking chart! It peaked at $3.40 in mid-June, and then crashed to $2.60 on Friday.

What happened?

On August 7 Rubicon announced an overnight marketed public offering of units.  They planned to raise $7 million, with each Unit comprised of one common share  and one Common Share purchase warrant with a unit price of $2.70, and an exercise price of the Warrant of $3.50.

What’s an overnight offering?

They are quite common: a company wants to raise a bunch of money, so they go to the broker community (in this case  a syndicate of agents led by Desjardins Capital Markets and including Canaccord Genuity Corp., PI Financial Corp. and Mackie Research Capital Corporation) and say “we want to raise $8.5 million, how much will you take?” and each broker says “I’ll take $2 million” or whatever.  It’s an overnight offering because on the evening of August 7 the brokers are notified, and they then contact their clients and say “how much do you want?” and each client says “I’ll take $50,000” or whatever.  The book closes before the market opens in the morning.

Obviously this is somewhat risky for the broker; if they agree to take $2 million, and their clients only want $1 million, the broker is stuck with a bunch of stock.

(And yes, I am over-simplifying this.  This was not a “bought deal” where the brokers committed to X dollars, but the concept is similar).

Why would a brokerage house take this risk?  Because, as the chart shows, the day before the deal was announced Rubicon was trading at $3.10, and the beginning of March Rubicon has traded in the range of $2.80 to $3.30 (with a one day spike to $3.50), so $2.70 is a safe bet.  Also, for added upside, the units come with a warrant exerciseable at $3.50, so if the stock exceeds it’s six month high there is more profit to be made.

So why did the stock tank on Thursday and Friday?

Because everyone who already owned the stock and got the phone call from their broker to buy in this overnight offering said to themselves “I’ll buy the units at $2.70, and then sell what I already own at $2.70, and I’ll be left with a $3.50 warrant for free!”  The warrant is good for 30 months, so it is, in effect, a 30 month call option at no cost.

A bunch of investors sold their original shares, and the price dropped.

But, here’s the thing: Rubicon will now have an extra 7 or 8 million bucks in the bank, at $2.70 per share, so there was minimal dilution.  According to the press release:

The Corporation intends to use the proceeds from the Offering for the continued optimization of its Delta BC facility and general corporate and working capital purposes.

In other words, they are using it to increase the profitability of the company, which should bring the share price back above $2.70 in short order.

Longer term, Rubicon is likely a take over candidate, perhaps at $5 per share.  Why?  Because, according to the company’s website:

ABOUT RUBICON ORGANICS INC.

Rubicon Organics Inc. is a Licensed Producer focused on building certified organic, super-premium cannabis brands at its flagship 125,000 sq. ft. state-of-the-art hybrid greenhouse located on a 20-acre property in Delta, BC, Canada. Management has unparalleled cannabis and organic farming expertise as well as prior successful commercialization of cannabis with Whistler Medical Marijuana Company, which was purchased by Aurora Cannabis in January 2019 for $175 million.

The Corporation is currently ramping up to produce approximately 11,000 kg of certified organic, super-premium and environmentally sustainable cannabis in 2020 and on creating super-premium brands in Canada. In the United States, the Corporation owns a 40,000 square-foot, high-tech hybrid greenhouse in Washington state which is leased to a state-licensed operator applying Rubicon Organics’ proprietary organic cultivation methods. The Corporation also owns two award-winning U.S. cannabis brands: 1964 Supply Co.TM and Doctor & Crook Co.TM; and has exclusive licensing rights in Washington for iconic lifestyle and cannabis brand, Cookies.

So here’s the play:

If you already owned Rubicon and bought more in the overnight offering, sell your shares at $2.70 or above and ride the warrant.

If you don’t own any, put in a buy order at $2.50 before the open on Monday morning, or $2.40 if you are feeling lucky, and see if you get filled.  If you don’t, no worries.

If you do, place a sell order at $2.70, or $2.80, or ride it back to $3 and sell then.

Makes sense to me.

Check in next week and see if it worked.

 

 

 

A Deep Dive on Gold

August 3, 2019

For some perspective, let’s start with a look at a twelve year chart of gold: Looks pretty good.  On August 1, 2007 gold traded at $645.  By September 1, 2011 it hit over $1,920.  That’s a nice triple in four years, but from there the correction began, culminating in a drop to $1,046 at the […]

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Great Week for Tesla (if you were short)

July 27, 2019

As regular readers of these ramblings know, I am not a fan of Tesla.  I believe that electric cars are the future.  I don’t think we are quite there yet.  Battery technology needs to improve, and we need to find a better way to generate the electricity that will power these cars.  (Burning natural gas […]

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NUGT – The best way to gamble on gold

July 20, 2019

Let’s talk about NUGT – Direxion Daily Gold Miners Index Bull 3x Shares, an ETF leveraged three times to the underlying gold shares.  If gold is going up, and I believe it is, you have a few choices: Buy physical gold – good idea, but you have to store it, which is not particularly convenient, […]

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Gold and Bitcoin – Both Looking Good

July 13, 2019

Now that gold appears firmly ensconced above $1,400, let’s review the charts: Here’s the conventional chart, gold, in US dollars, over the last three months.  An approximate double top was formed around $1,440, with a subsequent pull back to under $1,390, so gold must either break below $1,400 or back to $1,440; one of the […]

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Gold hits $1,400

July 6, 2019

For the first time in 6 years, gold topped $1,400 this week. That would appear to indicate that higher prices are in store for gold.  However, it would also appear that after the dramatic rise of the last month, a short pullback is in order. I of course like to play it via NUGT, which […]

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Bitcoin: It’s Finally Time To Discuss it

June 29, 2019

Last week I opined on whether or not the gold market is moving back into a bull market.  (Yes).  After six years, it’s back. Today, same question, but about Bitcoin: is the bull market back?  Yes. From a peak at around $20,000 (measured in USD fiat currency) in December, 2017, bitcoin dropped to around $3,000 […]

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Is a Gold Bull Market Finally Starting?

June 22, 2019

I have no idea.  Here’s a long term chart: We all know the story: gold went from under $400 in 2005 to $1,900 in 2011, and that was it.  Gold then took two years to drop into a trading range between $1,050 and $1,375, and that’s where it stayed, for 5 years, until this week. […]

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Gold: Finally

June 15, 2019

Let’s start with a long term perspective on gold; here’s the chart: From lows around $600 in 2007 and 2008, gold had a great run, topping out over $1,900 in 2011, before collapsing to under $1,050 at the end of 2015. Of note, gold never fell below $1,000. The epic crash never happened. $1,000 is […]

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