This Week’s Commentary – July 21, 2007 – Are We There Yet?

“Are we there yet?” – Every kid who has ever had to take a car ride for their summer vacation.

 

It’s a valid question, both on a long car trip (what did we ever do before we had on-board DVD players?) and after a long consolidation.

After a basically flat week, I look at my portfolio, and I see some ups and some downs. Mostly, I see bottom’s holding. Here’s a typical chart, this one of DML.TO – Denison Mines Corp.:

As you can see, a bottom was reached on July 3 at $11.90; the low on July 17 was $12.25, and Denison closed on Friday at $12.60, so even though it’s not pretty, it’s an uptrend, slow but sure. Obviously the medium term downtrend that started at the peak on May 9 at $16.30 is still intact, so there is no cause for celebration just yet, but a solid bottom makes for a prolonged rally, and that’s what we want.

I am also encouraged by the fact that the RSI, the MACD, and the MFI (Money Flow Index) are all increasing, even though the stock price isn’t. That may be a sign of good things to come, since particularly the MFI tends to be a leading indicator. (More details on the MFI can be found at stockcharts.com).

Other charts have more obvious bottoms, and are closer to significant break-outs, such as JNN.V – JNR Resources Inc.:

Obviously the bottom is in, the stock is over it’s 50 day and 200 day moving averages, and it’s moving up. The only worry now is that it’s had a good run, and the RSI and MFI are looking toppy, so if it runs a bit more it may be time to take some short term profits.

Other stocks have done even better, such as SMD.V – Strategic Metals Ltd.:

It’s approaching new high territory, which is great. It’s also, as far as I know, not a recommendation of Dines or Casey or anyone else; you read it here first. However, the RSI and MFI are also looking toppy, so if Strategic Metals doesn’t make a new high this week, it may be necessary to take some profits off the table as well.

We know that this is not the mania phase of the bull market for two reasons: First, most stocks are not making new highs, and second, some stocks are doing very poorly. Take a look at BTT.V – Bitterroot Resources Ltd.:

We first mentioned Bitterroot last November; fortunately we sold it a long time ago, for this, for all you who are new to the stock market world, is what we call a downtrend. Support above 50 cents has obviously been broken, so a drop to 40 cents is possible. We’ll wait until it turns up to start buying. (Although, for the gamblers amongst us, the MFI is in an uptrend, so that may indicate a turn around is imminent. I don’t speculate; I’ll wait for proof).

Bitterroot is obviously going down, Strategic Metals has obviously been going up; others are not as clear, such as URZ – Uranerz Energy Corp.:

As I mentioned last week, Uranerz is close to production, they are a “close to blue chip” company, but they had some bad press recently, and have been beaten down. On the chart above I have drawn green lines to indicate where the Money Flow Index fell below the 20 level. It has happened three times in the last three years, and each time it indicated the start of a rally. Other obvious support areas are the 200 Day Moving Average, and the 30 level on the Relative Strength Index (RSI), so I think we have reached a bottom, and I increased my holdings this week.

Of course nothing goes up forever:

Will the price of uranium level off? Probably. A fall to the $100 level would not surprise me, but when companies like Uranerz have a cost per pound of around $30, a $100 level doesn’t worry me.

It would be nice if the rally kicked in to high gear this week. The July options have expired, so they may help the process. Of course, I can’t make the market do anything. Wishing does not make it so. All I can do is watch, and take what the market gives me. My money is on the market giving us a rally over the next few weeks.

As always, please leave your thoughts by posting a comment below, or on the Buy High Sell Higher Forum.

Thanks to all for reading and contributing, and have a profitable week.

(I have to go now and try to avoid all of the Harry Potter hysteria…….).