This Week’s Commentary – July 28, 2007 – Was Thursday The Bottom?

by JDH on July 28, 2007

Well, it’s been a fun week (if you like roller coasters). Mostly down, but then up starting towards the end of the day on Thursday.

Last week I said that “I see bottom’s holding”, and I gave the example of DML.TO – Denison Mines Corp. which reached a bottom on July 3 at $11.90 which was still holding. Well, July 26 Denison traded as low as $10.44 (at 1:20 pm in the afternoon, and then up and back down to $10.43 at 2:52 pm) before closing the day at $10.81.

denison mines

Was the bottom reached at 2:52 pm on Thursday?

Clearly, I have no idea. The next support level appears to be around the $10 level, so I see no point in selling here, unless we have two or three more down days that take out the $10 level, then we are in trouble.

On Wednesday night, July 25, I said:

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.

Well, obviously in the case of Denison, the previous lows were broken. Is this my “two or three day fake out”, or the start of something more serious?

I suspect it’s just a fake out, given that on Thursday afternoon at 2:52 pm Denison began to move higher, and did so for the remainder of the week.

More examples:

On March 5, 2007 PDN.TO – Paladin Resources Limited 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. So far, so good. Then, on Thursday afternoon Paladin, at 12.52 pm, traded at $6.58, before recovering to end the week at $6.95. As I showed on Wednesday, the RSI, the MACD, and the MFI are all turning upward, which probably means a recovery is at hand. Again, though, we won’t know until this time next week.

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. Interestingly Mega bottomed out on Friday morning, at 9:40 am, at $5.31. Well, by a penny, the July 3 level has held. Mega closed Friday at $5.46.

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. Unfortunately Fronteer then fell to $11.60 on Thursday (at 12:40 pm), before running back up to close the week at $12.65. (Yes, $12.65, the March 5 low).

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. The worst came on Thursday at 2:52 pm when Cameco his $41.74, before closing the week at $43 even. (And no, I still haven’t bought any, but as I said on Wednesday,it is tempting at these levels, given all of the institutional lemmings that keep recommending it).

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, and then fell to $9.02 at 11:12 am on Thursday, before recovering to close the week at $9.52

Some other stocks are more troubling:

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. Thursday was not a good day, as Uranerz fell all the way to $3.33 at 2:04 pm, before recovering to close the week at $3.53. Is this a classic fake out, coming down to, but not breaking, the February 9 levels, or will the downtrend continue? Time will tell, but I have reduced my holdings.

SXR.TO – Uranium One, Inc. bottomed on January 9, 2007 at $13.08, and then again at $12.75 on July 3. The decline continued to a bottom for the week on Thursday at $11.19 at 1:12 pm, before a recovery to close the week at $11.83. This one sure looks like a downtrend, so I have drastically reduced my holdings. I’ll come back when a bottom is more evident.

But wait, there are actually some charts that are looking much better. Take, for example, JNN.V – JNR Resources Inc.:

jnr resources

The bottom was reached way back on June 13 at $2.39, and we are now trading at $3.01, so it looks like the worst is behind us. This is one of only a few of our stocks that is actually trading above it’s 50 and 200 day moving averages, so this would be a good one to mark as “accumulate”.

Another holding, although not a prestigious, is GEM.V – Pele Mountain Resources Inc., which has an interesting formation:

pele mountain

It appears that there is a solid base around 80 cents (no sign of a break down like some of the others), and if the downtrend is resolved to the upside, we could have a nice pop. I’m not selling this one.

Other stocks have done even better, such as SMD.V – Strategic Metals Ltd.. It’s flirting with new high territory, and I assume it will take a run at the $1 level in the next few weeks. It’s also, as far as I know, not a recommendation of Dines or Casey or anyone else; you read it here first.

There are other examples, but I think you get the point.

On Wednesday night, I also made a 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.

Little did I know that while I was writing my thoughts, Mr. Dines was issuing an Interim Warning Bulletin, the first one I can ever remember being issued after 8:00 pm eastern time.

Alas, he did not say to “back up the truck”. He said a bunch of stuff, none of it any different than what he had said before. Therefore, I reiterate my previous prediction: If we do have another bounce up this week, the “back up the truck” message is sure to follow, so I prefer to be in this market, not out of it.

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.

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