Rare Earth Metals: AVL.TO - Potential Setup

If this count is correct, next week should start to see strong gains in this stock.  The wave count + fib levels fit extremely well.  Even Wave 2 and Wave 4 retraced the same amount 38.2% of Wave 1 and Wave 3 respectively.
Wave 4 retraced to 4.98 closing the previous gap.  The very short term which I would consider 1-2 weeks could show a bit of downside, but overall relatively bullish on this.

Conservative trade would be buying a breakout of high in Wave i, setting a stop just below that level.

A more aggressive trade would be buying when the 20 MA is reclaimed which is currently at $7.27.  Setting a stop just below this.

Even more aggressive trade would be Buying at 6.81-6.85 if it gets to there, as if this level breaks the count would be invalid.

I currently hold a small position in this and might look to call options if the price continues to sink on Monday.


Predicted tops for this wave 5:  From http://www.terminusa.com.ar/

The most likely are bold, and current price of AVL is sitting at $7.12.  Therefore, ignoring the lowest since this has already got to 7.53 during this leg up, we can see that $8.01 is the next likely target.  So even if we take the worst case, the upside is 12.5%.   High gain for relatively low risk if bought just above the last break low of 6.83.  With a stop under this or 6.81 (previous break). 

My major caveat to this goes directly against charting as you shouldn't care of the underlying asset when doing an analysis but I look towards geo political events as well as mining activities around the world.  Everyone now is looking for rare earth and as AVL is not a producer yet it isn't capitalizing on the high prices of materials.  So China's export policy is a key issue to the value of this and other rare earth exploration / developers.  Currently supplying 97% of all rare earth materials to the world, China has slashed export quotas along with creating stricter emission standards for rare earth exporters.   These actions led to the dramatic rise in price of mining / exportation / developers of rare earth outside of China.  AVL on the TSX, is Avalon Rare Metals Inc.

There Website front page provides the following information:
"Avalon Rare Metals is a Canadian mineral exploration and development company with a primary focus on the rare metals and minerals, headquartered in Toronto, Ontario, Canada.
Avalon's primary asset is the 100% owned, advanced development stage project, Nechalacho Rare Earth Element Deposit located in the Northwest Territories, Canada.  Avalon believes that Nechalacho is one of the highest quality undeveloped REE deposits in the world, unique in its exceptional enrichment in the heavy rare earths.  Avalon also owns four other rare metals and minerals project in Canada, of which three are at advanced stages of development. "

GOLD NEW HIGH - 1,437.7 U.S. dollars per ounce - S&P 500 shows weakness

1,437.7 U.S. dollars per ounce..... new record high congrats gold.  

With oil hitting $102 today, I would expect more downside on the S&P 500.  I mentioned this weekend that I expected the S&P fall.  Monday allowed me to take a small position in call option for SDS which is an inverse 2x bear S&P 500 ETF.

I don't have the technicals up but they look quite negative at the moment so a test of the 50-day MA at 1294ish is likely. It the market doesn't handle the 50 Day MA very well, next stop would be around the 1270 level.


Also Picked up a Copper option for CUM.TO

Copper mountain mining if it manages to get above the strike price of 7.00, there is a strong likelihood that it could test the bollinger band about 60 cent away.  With still a decent amount of time value left a move to 7.50 over the next 2 weeks would result in a very profitable trade.  However, there is decent downside risk.  If the 50 MA doesn't hold up, the next major resistance is under $6.00 putting this option deep out of the money with the options Ex date at April 16th.

GPR.TO Great Panther Exit -- Small hedge in SDS (S&P 500 2x bear ETF)

GPR.TO I have been talking about a few days before I entered into a small position on Feb 16th.  Technicals looked good and silver started to make strong moves.

This stock has easily the 7-8 dollar potential that AXR.TO and EDR.TO have.

Currently however I decided to pull the plug on this trade as the stock appeared overextended with RSI at the 87.67 level, Slow Stoch dipping below the 80 line and with the macd making the second leg of a momentum bid.

Volume as you can see is declining on the stock, which confirms the assertion that the momentum might fade in the short term.

As you can see the exit is at 3.84 and the stock closed at 3.94, which could indicate a loss of potential upside.  However, the risk at this level is a bit more than I wish to take on.

I will look to buy back in at a test of the 20 day moving average which is at 3.62 but climbing rapidly.


I took a small position in options for SDS which is a 2x bear ETF.

The option has a strike price of 22.00 at a premium of 0.30 per option with an expiration March 19th

The rational for this trade is a possible impulse wave to the downside on the S&P 500 which equated to a impulse up for the SDS (inverse to the S&P500).

Ideally the previous low will not be taken out which was the 23.6% fib level (retracement).
This means the S&P early tuesday will fall.  Silver and S&P500 have been over the medium term been correlated relatively well.  However, Silver corrected at the start of the year while stock markets continued to climb ever higher.  We have just seen the first significant break in the S&P500 where we have broke the 20 day Moving average.   So as both were up today i decided to take a small position as a bear for the overall markets.  If silver / gold / platinum / rare earths move up with the general markets this option will expire worthless.  However if it is Silvers turn to weather a storm from the overall markets there is potential that the market collapses with silver and gold to continue strong.  in this case the option will be profitable with overall silver position also accumulating.

With the Libyan situation affecting oil, US housing market and employment continuing to show weakness, with Ben Bernanke testifying in congress tomorrow on economic outlook, other commodities pricing making new medium term highs there is plenty to be pay attention to over the next few days.


New position in AVL.TO - Avalon Rare Metals
Talked about this stock since September.  It is one of the few rare earth metal plays in North America and the stock shows its extreme strength recently.

I think there is a classic cup and handle pattern developing.  The way I counted this wave structure, the expectation is that a a move to $10 is possible within the next couple of months.



A Small plug for an Android Widget that I check at least 10 times a day.

Kcast by Kitco which I use to display intraday gold, silver, platinum charts.