My fearless prediction……

by JDH on July 25, 2007

Are we having fun yet?

No, we are not, but I don’t think the world is ending, either. Take a look at this chart of PDN.TO – Paladin Resources Limited:


Here’s what I see:

On March 5, 2007 Paladin made a low for the year, intra-day, at $6.75. Up it went from there, and then came all the way back down to an intra-day low of $6.81 on July 10, 2007 (see the purple horizontal line). The low was tested, but it was not broken. This is good news.

Obviously Paladin is still in a downtrend from the peak of $9.99 achieved on April 10, 2007. (Funny how it got all the way up to $9.99, but couldn’t go one penny higher to get to $10. One stinkin’ penny, and it couldn’t do it. This alone is proof that investors are subject to the same crazy psychology as all the rest of us. But I digress).

However, even though the stock is going down, the RSI, the MACD, and the MFI are all turning upward. Talk about your contrary indicators. (Yes, yes, I know, you can’t just draw trend lines under these indexes and prove a trend, but again, don’t think, just take a look).

I won’t bore you with a bunch of other charts, but here’s some food for thought:

MGA.TO – Mega Uranium made a low of $5.58 on March 5, fell to $5.30 on July 3 (virtually the same level), and increased to close at $5.70 on July 25. The base is holding.

FRG.TO – Fronteer Development Group Inc. made a low of $12.65 on March 5, fell to $12.06 on June 7, dropped to $12.22 on June 26, and closed on July 25 at $12.26. Sure looks like a base to me.

CCO.TO – Cameco Corp has a bunch of closing prices in the $42 range: February 20 at $42.39; March 1 at $42.44; July 24 at $42.85. Cameco hasn’t closed below the February 20 level since February 20. It closed on July 25 at $44.34. Sure looks like floor to me. (And no, so far I haven’t bought any, but it is tempting at these levels, given all of the institutional lemmings that keep recommending it).

Let me beat the point to death:

PNP.TO – Pinetree Capital Ltd. bottomed at $9.08 on February 7 (split adjusted numbers), touched $9.26 on March 5, $9.12 on June 26, and recovered to $9.75 on July 25.

URZ – Uranerz Energy Corp bottomed at $3.45 on February 9, touched $4.07 on March 5, and closed at $3.86 on July 25. Not as nice as the other examples, but we are still above the February lows, if not the magic March 5 levels.

What about DML.TO – Denison Mines Corp., discussed extensively here on Monday in my History Repeating Itself discussion? Denison’s low for 2007 occurred on January 11, 2007 (Sir John A. Macdonald’s birthday, Canada’s first Prime Minister, for those of you non-Canadians who may not be aware of the historical significance of that date) when it bottomed at $10.17. Other lows occurred on March 5 at $11.77, July 3 at $11.82, and July 25 at an intra-day low of $11.00, closing at $11.12. Again, the March 5 and early July lows have been broken, which is not good news, but they have not been broken significantly, and the year lows are still in place.

I said it on Monday, and I’ll say it again:

Now is the time to buy, not the time to sell.

The smart guys that control this market cashed in at the highs, and have let prices fall; we are now reaching significant support levels, and that’s where the smart guys start buying again. In fact, looking at the action in stocks like Cameco, they have probably already started to accumulate. The lows may not be happening on exactly the same days as last year, but I still believe August will be a good month. We could have a day or two shake-out where the previous lows are violated, just to sucker guys like me who are looking at the charts and saying “I better sell if those March 5 levels get broken”. I’m not falling for it. Unless the break down happens for two or three days past that point, it will be a fake out.

Am I sure?

Of course not. I’m just some guy who writes a blog. (Which makes you, dear reader, just some guy/gal who reads my rambling musings). Einstein I’m not.

However, since I have to place my bets, I’m betting that this is indeed a base.

Now, for my fearless prediction:

If this is in fact a base, everyone will realize it soon enough. I assume our friend Mr. Dines will realize it (I’m sure he’s got much better charts than I have). That means sometime this week, or perhaps next, as the markets start to rise above these lows, he will issue an Interim Warning Bulletin telling us to “back up the truck” and buy these stocks “before the train leaves the station” at prices “we may never see again for a generation”. We will all buy, and the prediction will become a self-fulfilling prophecy.

Here’s some more quotes from the as-yet-to-be published IWB:

“nobody predicts the future correctly every time; we hope to be right seven, or maybe even eight times out of ten”

“we used some rather obfuscating language to predict a possible Consolidation back in May, and even though we didn’t have the foresight to tell you to sell and buy back later, it was a pretty good call, eh?”

“we just work here”

“keep an iron hand on the tiller”

“DINOMITE” (I’m just guessing on this one, but at least one Dine-ism will be quoted).

Am I poking fun at Mr. Dines? Well, yes, I guess I am. But as readers of this blog are well aware, I have made lots of money in the past from both his recommendations and his thought process, and I would only be too happy to have that winning streak continue.

Here’s to a blast off from the bottom………