Bullish Engulfing Japanese Candlestick

Simple is easy - I like easy.




Here is a simple explanation of a Bullish Engulfing Japanese Candlestickpattern which is a reversal pattern - meaning a trend change. This is the DZZ - double short Gold ETF - it's a great hedge for anyone with positions in miners, tech stocks, etc. I don't believe Gold is hit its peak yet, but I do believe its corrections will become faster and more violent. Take the DZZ overnight with you for a good night sleep!

AUY: A cup and handle filled with fundamentals.

With gold prices at record levels, and this new $1,000 gold quote largely accepted in the new world, AUY could be poised to make a run higher. Looking at the relative performance of the stock compared to other juniors such as KGC, AU, and GG, you can see AUY has lagged and stalled during these recent boom times in junior miners. It is showing some of the worst performance among some of it's equivalents.



3 Mines To Commence In 2012

A 3yr period of a stagnating bottom line may be about to change as Yamana plans for 3 mines to commence in 2012. The company currently produces around 1.1 million GEO's and expects that number to hover or slightly rise for 2011 as more efficiencies are constructed and worked through existing mines. It's what it expects to do in 2012 that matters - the company expects production to jump, reaching near 1.5 million GEO's by 2012 with the addition of 3 mines coming into production: C1 Santa Luz (Brazil), Mercedes (Mexico), Ernesto/Pau-Au-Pique (Brazil).

With an expected near 30% jump in production numbers coming in 12-16 months and we continue to see rising prices in gold, this makes a good case to own AUY for the long-term. Nothing has come online since 2009 in terms of Gold expansion, since the 20 month construction of Gualcamayo in Argentina. This 2012 production expansion means rising revenue. With the increase in projected gold production of 400,000 ounces, this adds nearly $500 million in revenue using an avg. price of $1,200 an ounce. This increases the current $1.4 billion in revenue(ttm) to $1.9 - 2 Billion in projected revenue, a near 35% jump in revenue.

BOOK VALUE

If we look at a simple Book Value comparison in a couple of the junior miners, we can see AUY trades at 1.22 Price to Book almost book value as of today. With GG and KGC trading at 2 and 2.23 Price to Book respectively, AUY could almost double to get where KGC and GG are trading. And to reach the relative Price to Book of AU and IVN, AUY would have to rise 2-3x in price.

BOOK VALUE COMPARISON



The Book Value and Price To Book value are telling you that AUY is undervalued and could be headed higher. Base on a possible technical formation called the Cup and Handle AUY could be headed for $15 dollars in the near term, and if we valued it at a Price to Book of 2, we'd be trading around 18. And if the market valued AUY according to an AU and IVN book value, AUY would be in the 30's, heading to $40.




The technical formation above is a continuation pattern. The trend has been up, but stalled in the past 3 years as Yamana focused on integrating new efficiencies in production, rather than new production. Now Yaman is ready to ramp up production and the last time they did this, AUY went from $2 to a high near $18 dollars from 2005 - 2008. With gold prices elevated, production getting set to rise, a book value that may be lagging its coming rising production, Yamana is set to run and possibly even jump a few times also.

Gold will correct - miners show outperformance.

I was cleaning out my 90 different charts I have annotated because I became unorganized in my research which ultimately creates sloppiness in my work. As I was deleting unwanted charts, I stumbled on a chart of the GLD and noticed some advice I posted on my blog more than a year ago. It was about a $1,300 dollar price target on Gold and around a 130 price target for the GLD. Although I believe we still have more upside to finally reach the 12th round of this Gold vs. The World grapple match, I will take my own advice and call this current move complete and will assume a consolidation for 6-9 months .

I first analyzed the chart below in the blog post Assessing The Gold Breakout - in the article I pointed out some guidelines of technical analysis for determining price targets on some of the different type of potential pattern breakouts that were occurring in Gold and the GLD.

This chart is from that blog on the gold breakout in August of 2009.



This is the same chart with time elapsed to present.



Basically, the price target I was predicting is here - 1300 - and the current Gold trade is finished for now. If we see more upside momentum, it will be short lived IMO. Although Gold is overdone on the long side, the new price levels in which Gold will consolidate are now higher than that of the last two years. This means volatility in the price itself which translates into smaller margins for the Large Cap miners. For the junior miners, small-cap and exploration companies, this means their growth potential and margin potential will continue to shift in the right direction - especially miners with rising production numbers.


The below chart is the Junior Miner Index - Market Vectors Junior Gold Mine - which is outperforming Gold and the Large Cap Miners in the GDX. This means finding the right mining stocks, specifically ones with growth and rising production will pay off medium-long term.




The Gold bull remains but a short-term correction will occur and I will assume it will be faster, more violent than any correction to date in the current Gold Bull. It will also provide great trading opportunities, specifically on the volatility side. It's also a good time to start implementing any option/equity strategies to hedge your risk according to your market bias.

Advanced Battery ABAT

Lets keep it simple: Advanced battery comes to huge inflexion point!

If that uptrend line is broken by more than 20%, bail. If it stays in tact, not breaking the -%20 percent loss from here than hold on to it because we could begin to see a large move coming.





Advanced Battery Technologies, Inc., through its subsidiaries, engages in the design, manufacture, and marketing of rechargeable polymer lithium-ion (PLI) batteries in the United States, Europe, and Asia. The company’s rechargeable PLI batteries are used in consumer products, such as portable computers, personal digital assistants, and cellular telephones. It also develops and manufactures various types of electric vehicles, including electric bicycles, electric scooters, and electric sports utility vehicles.

STOCK OF THE WEEK - OTE

Greece, Greece, go away, come again another day, Wall Street wants to play, Greece Greece go away.


CHANNEL BREAK - OTE Hellenic Telecommunication

STOCK OF THE WEEK - COIN

Converted Organics COIN - Converted Organic Website

Here is a chart that shows some bottoming action, and also coincides with the theory that food/fertilizer/agriculture stocks will start outperforming for the summer since theoretically they are the last to move in the market cycle.




We may get some short term weakness as we look for continued volume increase here - more volatility before we see a large move to the upside. Let's protect ourselves with a stop loss placed right below the green support line. Long term bottoming action with a 3-5 month swing time on this one. Take profits at resistance, or at least sell half and re-evaluate. Good trading!!

The Coming Spike?

Markets have been steadily climbing, without hesitation but does that mean we are do for a correction? Maybe, or are we about to just plow through any correction and blowoff the bull market in the coming weeks? Chart one shows the Elliot Wave Theory within a channel trend. The signals are pointing to a weakening pattern, but prices can still move higher as the technicals continue to weaken. The rising prices are unsustainable long-term, but in the short-term we can see a blowoff top that would signal the end of "The Great Bounce Of 09", so some strategic planning and execution are what matters - defining a plan is a must to reduce risk.







And what does a simple calculation from Technical Analysis 101 mean for the market? Based on the Head and Shoulders Pattern calculation[(neckline - head) + (neckline) = Target], so the target for the Dow is anywhere between 11500-12500 (see chart below) - I use this large area in the Dow loosely because anything is possible. This is where your execution and plan comes into affect - defining where you want to be for the next 6-9m is crucial in the coming weeks. Liquidation will occur in this area which will increase volatility - it's already showing signs in the VIX.




The only thing one can do is take a measured approach to your risk appetite. You can start to diversify out of stock and into cash or you could take on some hedges by going short the areas of the market which you believe will fall, faster and further, which would hopefully offset the losses from any part of the portfolio that is long. The coming week(s) are going to be one for the record books, again!

Good Trading!