This Week’s Commentary – November 24, 2007 – All Looks Higher To Me

by JDH on November 24, 2007

First, a happy belated Thanksgiving to all my American friends. The day off on Thursday seemed to increase the volatility this week, but by the end of Friday my portfolio for the week had fallen less than half of one percent, so it ended up being a basically flat week.

So, what do I think? I think the same as I thought last week:


On gold, I said “I see a healthy consolidation. The uptrend line going back to August 16 is still intact, although only just barely. Gold is still trading well above it’s 50 and 200 day moving averages. And, the RSI is now down below 50, a significant drop from last week, which probably signals a buying opportunity.”

Gold Chart

Well, guess what: Gold bottomed out just before the 50 Day Moving Average Level, and has moved up ever since. I have no doubt that at some point the old highs will be challenged, probably sooner rather than later. I see absolutely no reason to be seeing gold at these levels. The Big Boys can manipulate the market all they want; the fact remains the no-one wants to hold paper currencies, physical demand is high, production cannot keep up, so the price is heading higher. It’s as simple as that.

Let’s not over-think this: a trend in motion stays in motion, and the trend is up. I assume we will see $1,000 before the end of February, 2008.

(I of course have no idea what will happen next, and I am wrong as often as I am right, but since you have taken the time to read this far, there’s my prediction).


More from the Department of the Obvious: Uranium is going up:

Ux U308 Price

As I have said before, I’m no “rocket surgeon”, but October sure looks like a bottom to me, so I assume we will see $100 uranium before we see $80 again. ($120 by the end of February, if you really have nothing to do but listen to my silly predictions).

The Double Bottom

As I have said many times over the last three months (for example, on September 29), it is necessary to retest the August 16 lows before we can have a sustained move to the upside. In fact, here is what I said on September 29:

“Again, to beat a dead horse, I still believe a normal market pattern would be to re-test the August 16 lows. I don’t believe we will get down to those levels, but nothing goes up in a straight line, so I plan to gradually deploy cash over the month of October, with the expectation that November and December will be excellent months (as they traditionally are; just look at the charts). ”

Okay, so I’m not the Amazing Kreskin. Obviously November has not been “an excellent month”, although it’s not over yet. Obviously I didn’t need to be a heavy buyer in October; I could have waited until November. My timing was early.

However, look at the charts. Start with the uranium chart above; the low point for the year was in January and February, it peaked in the summer, and fell to a bottom in October. The October bottom was a retest of the February lows, but it did not break them. Therefore, the uptrend is mildly intact, and we should continue to move upward from here.

(The Gold chart is more obvious, since we have only had a minor two week pullback in gold, which as I said earlier is very healthy).

The gold stocks look fine; here’s my largest holding, K.TO – Kinross Gold Corp.:

Kinross Gold Corp

Obviously the August 16 lows were retested in September, and it’s been onward and upward from there. We had a normal and healthy consolidation in early November, and the uptrend has continued. (Note that, like the gold chart, the 50 DMA provides important support). I see no reason to believe that we won’t look back on this one at the end of December and wish we owned more. I’m sitting on a 17% profit at the moment, and I have no plans to sell.

If gold is in an obvious uptrend, what about uranium stocks? One of my larger holdings, at 5% of the portfolio, is JNN.V – JNR Resources Inc.:

JNR Resources

Again, the August 16 lows have held, a new uptrend appears to have begun, and the RSI is at favorable levels, so I see no reason to do anything but hold (or buy) this stock.

Every chart does not look quite as pretty. Take for example FRG.TO – Fronteer Development Group Inc.:

Fronteer Development Group

The August 16 lows were retested, and the increase has not been as strong, but I still believe the trend is up, so I interpret this stock as a “buy” (which is good, since it is currently 6% of my portfolio).

Some charts are much worse, of course, such as UUU.TO – Uranium One Inc.; here’s the three year chart:

Uranium One Inc

Obviously slashing their production forecasts was a big negative for the stock, and the three year uptrend has been broken. It’s only 2% of my portfolio, but I’m sitting on a 20% loss. Should I sell or hold?

In hindsight I should have sold as soon as the bad news was announced. However, this is still one of the few actual uranium producers out there, and as the price of uranium increases, so will the price of this stock. And at these depressed levels, wouldn’t this be great as a take over candidate? I don’t see it going much lower, and I see a big upside, so I’m holding.

There are many more stocks to discuss, but I think you get the point. I’m satisfied where I am positioned; we will see in the coming weeks if my satisfaction is warranted.

As always, thanks for reading, and please continue to share your thoughts on the Buy High Sell Higher Forum.

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