April 5, 2008 – Finally a bottom? Please?

by JDH on April 5, 2008

Well, judging by the panic on the Buy High Sell Higher Forum, I would say we have reached the bottom. That’s good news for all of us.

According to the Buy High Sell Higher Forum Stats Page, there were 17 new Forum members in March 2008, the most new members in any month in the last year. The number of new posts, and the number of members on-line at any given time were also at or near record levels.

Obviously the Forum is very small in comparison to every other site on the web (which is the way I like it; I have a day job, so I don’t want to spend all day deleting spam posts from internet crazies, and I prefer a smaller core group with intelligent thoughts to share, rather than thousands of people with time to kill). However, even though it’s small, I think it is a good indicator of “mass psychology”. At major inflection points (up or down) we pay closer attention to our stocks, and we want to talk about it more.

So, using you, my dear readers and contributors, as my technical indicator, I hereby proclaimed we have bottomed.

Until the next bottom, which quite likely will happen in May, or June, or the summer, or sometime soon. These are volatile times, you know.

Let’s look at some charts to see if the BHSH Forum Indicator is correct and we have reached a bottom. First gold:

insert gold chart here

This three year gold chart clearly shows that we are still in a bull market. Obviously the pace of the increase has slowed, but it still looks up to me. I assume that $900 is the new floor, but time will tell if and when another retest happens.

gold chart

This chart of G.TO – Goldcorp Inc. indicates quite clearly that we are in a bull market, and the uptrend line drawn from the August and December 2007 lows remains intact, so I see no reason to panic.

The chart of AEM.TO – Agnico-Eagle Mines Ltd. isn’t quite as pretty:

agnico eagle

Even so, the August and December lows have never been in jeopardy, and we are now again above the 50 day moving average, so I’m a buyer at these levels, not a seller.

It looks to me like ABX.TO – Barrick Gold Corp. has also found support, although it ended the week down 3.4%:


Barrick remains well below it’s 50 day moving average, but at these levels it’s also a buy. This is about as old-fashioned a blue chip gold stock you can get, and when gold resumes it’s upward run and gets back in the headlines, this is the stock that all the fund managers will be buying. It’s a nice conservative piece in every portfolio to counter-balance all the higher risk stocks we all love to ride up and down.


The uraniums don’t look anywhere near as pretty, but bottoms do appear to be in sight.

FRG.TO – Fronteer Development Group Inc. has had the crap kicked out of it recently, losing two thirds of it’s value in the last year. (You can review the explanation from my March 22 Fronteer Development Group commentary).

fronteer development

It’s small consolation, but the June 2006 lows have held. The low for the year was $4.77 on March 24, so closing on Friday at $5.56 is a very good sign. My interpretation is that the April 1 close of $4.89 was the retest of the March 24 low, and it’s now onward and upward from here. That’s good news for me, since I’m in the hole on Fronteer, so a bounce would be appreciated.

DML.TO – Denison Mines Corp. has a similar chart, although not nearly as bad:


Obviously we are still in a downtrend, but it appears that $6.19 will be the bottom, reached on February 7 and 8. We got down to $6.48 on March 31 and held at that level, so again I’ll interpret that as a retest and assume we are going up from here. My average cost is $7.56, so at Friday’s $6.84 close I’m under water, but the direction looks good, so I’m holding.

The best performer on the week for me was UUU.TO – Uranium One, Inc. , down 11% on the week, including an uptick of 15% on Friday, so time will tell if we have finally reached a bottom.

My guess at the moment is that April will be a good month, but as we approach May the selling season will begin. “Sell in May and go away” is usually wise advice, particularly when dealing with the Canadian juniors since the summer is vacation time here in the Great White North. (And yes, it’s April 4, and there is still a lot of snow on the ground in my corner of Southern Ontario. Fortunately we are expecting sunny and warm temperatures all weekend, so this weekend won’t be spent sitting at my computer). I will start to trim as the month winds down, and then we will see what we do from there.

The week started down, we recovered a bit at the end , but I am still down 8.3% on the year, but for now I’m content to hold as the market recovers.

Thanks for reading, and keep on posting your comments on the Buy High Sell Higher Forum.

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