This Week’s Commentary – March 8, 2008 – Consolidation As Expected?

Hmm. Interesting week. Last week I was down 2.5% on the year; today I’m down 2.9% for the year, so it was basically a flat week.

Last week I said that I thought gold was due for a pause, because the RSI was over 73, and the price was significantly above the 50 day moving average. I said that while gold could continue to run, I expected to see $900 gold before we again saw $1,000 gold, which I predicted for “sometime in March or April.”

Then, on Wednesday March 5 I commented we were in a normal, very brief consolidation. Last week spot gold closed at $975. This week it closed at $974.20. You can’t get much flatter than that.

So, was I right that gold will consolidate, or was I wrong? We will know this week. The RSI has dropped from 73.19 to 63.13, so obviously some of the pressure is being reduced, but the big gold stocks remain at high levels.

For example, AEM.TO – Agnico-Eagle Mines Ltd. is only one day removed from an all time high, but it’s RSI dropped on Friday to 65.65, so it’s back below the magic 70 level, approaching buy territory. I’m putting my stink bids in at $67.50 this week.

The charts of K.TO – Kinross Gold Corp. and G.TO – Goldcorp Inc. look much the same, so my stink bids this week will be at $24 and $41 respectively. Those are bids not significantly low where we are, because I’m not expecting a massive correction, just a small pull back before gold resumes it’s assault on $1,000 later this month.

Uranium

Last week I made fun on Mr. Dines for finally recommending a sell on UUU.TO – Uranium One, Inc.:

I’ve marked his buy and sell points on the chart above. Remarkably, he recommended buying at $4.25 back on June 27, 2005, and his readers could have executed the sell signal at the open on Monday with the price around $4.93. Not much return for two and a half year’s work. This is remarkable for two reasons:

First, how can you let a stock go way up, and then all the way back down, without selling it?

Second, apparently Dines doesn’t matter much any more:

There was no massive drop at the open on Monday. In fact, the shares opened at $4.93, and closed the day at $5.04. In other words, Dines said sell, and the stock went up! I suspect that was partly because lots of people, including members on the Buy High Sell Higher Forum, had their bids in to bet against Mr. Dines.

You can read the discussion on the Uranium One Board. Last week I asked the question: where should we place a stink bid on Uranium One? So far it appears the correct answer was $4.50, picked by 27% of you. Apparently those of us who thought the stock would see $3.50 on the Dines sell recommendation were disappointed, since apparently all of Dines followers sold this dog a long time ago.

Have we reached a double bottom on Uranium One? Not according to the above chart, but the argument can be made that we are very close, so it’s probably a low risk bet to start buying at these levels. They are a producer, after all.

Also last week I mentioned Technically Uranium With Merv, a blog, run by Merv, that contains daily technical commentary on the uranium market. Merv is still short term bearish on uranium, but I see no reason not to have some stink bids in on some uranium stocks.

For example, a week ago I sold DML.TO – Denison Mines Corp. at $9.17; since I paid $6.93 a short time before, I was quite satisfied. It closed on Friday at $8.61, so I’m placing my stink bids at $8 this week, just slightly above the 50 day moving average.

Those are my thoughts for today. I suspect I’ll be spending a good part of today shoveling snow; my patch of Southern Ontario is getting hit yet again.

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