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.

GPR.TO Great Panther Resource is........ Great. Bounces back over 12%.

A sizable shakeout occurred on Thursday where the stock collapsed.  This size of this was not expected  but as the price action was trading above the bollinger bands it would make sense for a correction to bring the price action back within these bands.  This would have been an amazing time to buy as the price dropped to the previous all time high back Dec 7th @ 2.90.  Price came within 1 cent with a low of 2.91 on the 24th.

As price action is still at bollinger band I don't expect continued 12 % jumps in this stock.  However, it was one of the strongest silver play recoveries on Friday February 25th, 2011.

Previous article here.

Eating volitility for breakfast

Charts from Kitco

Silver clawed back progress from the bears today.  The key is to just take the volatility for what it is.  Overall trend is up for these metals, however corrections are expected and healthy.  Nothing can go straight up, so pull backs that continue to prove there are buyers at these levels are important for the overall market behaviour.

Yamana Gold Inc. TSX: YRI - Q4 earnings + Annual report. RECORD REVENUE, RECORD EARNINGS, RECORD CASH FLOW & RECORD PRODUCTION

Production mining companies are in for massive moves.  This has been the expectation of this blog for some time now.  And 2011 is going to be a big year.  We have tracked AXR.TO go from a $4 stock to $8, FVI.TO go from a $2 to a $5, SBB.TO go from a $3 to a $6, GPR go from a $1 to a $3, the list can go on.

So of the bigger players such as Yamana Gold Inc are starting to report earnings.  This was released after the bell on Wednesday.  See full report here.

Highlights quoted from report are as follows:

HIGHLIGHTS FOR THE FOURTH QUARTER 2010

    -   Record revenues of $535 million, more than 34% higher than the same
        quarter in 2009
    -   Net earnings of $160 million or $0.22 per share, more than 340%
        higher than the same quarter in 2009
    -   Record Adjusted Earnings of $173 million or $0.23 per share(1), an
        increase of more than 70% from the same quarter in 2009
    -   Record fourth quarter operating cash flow of $265 million, $0.36 per
        share,(1) an increase of 71%
    -   Production of 286,682 gold equivalent ounces (GEO)(1)(2) in the
        fourth quarter at cash costs of negative $34 per GEO, which included
        record production at El Penon of 113,800 GEO

HIGHLIGHTS FOR THE FULL YEAR 2010

    -   Record full year revenues of $1.7 billion, an increase of 43% over
        2009
    -   Record net earnings of $451 million or $0.61 per share, an increase
        of more than 130% from 2009
    -   Record Adjusted Earnings of $451 million or $0.61 per share, 30%
        higher than 2009
    -   Record full year operating cash flow of $747 million, or $1.01 per
        share, representing an increase of 51%
    -   Record production from continuing operations for the year of
        1,047,191 GEO at cash costs of $50 per GEO
    -   Positive construction decisions made on three projects during 2010;
        Ernesto/Pau-a-Pique, QDD Lower West at Gualcamayo and Pilar. These
        projects are on track for production start-up in 2012/2013
    -   Cash and cash equivalents of $330 million at December 31, 2010, an
        increase of $160 million from 2009
    -   Debt decreased in 2010 by $45 million

The way I decided to play these annual announcements is via options.

Option expiration March 19th contract.
Strike price: $13
Premium paid: $0.15
Current premium: $0.19

Above, the vertical line is the expiration date, and the horizontal lines are the likely targets based on fib projects of wave 1.  The key is how the market will react to the annual report tomorrow. Given the fact that they made record profits on record production etc.... The market has only one way to take this..... very bullish especially with the fact that silver and gold prices are still hanging around their highs.

Markets get shaken up - a Look at SPY

Using the SPY as a proxy for the S&P500 volume.  It has been noted by many that any time there is real volume spikes they only occur on sell days. And strong sell days.  2% today.

Just like in January when Egypt's situation spooked the markets, it is hard to call this the turning point.  However, I believe that these type of strong sell days demonstrate how fragile the US markets are.  It should be noted that the MACD crossover has occurred and the Slow stoch has broke its embedded nature.  However, technical analysis seems to have lost its role in the current market.  That happens when billions of dollars are pumped into the market bi-daily.

Gold / Silver had a correction today which was expected as they have had huge gains. Silver is still holding above $33 which is the highest point since last year.  All eyes seem to be turning to $50 silver as the next likely stop.

What is interesting to note is that the metal markets and the stock markets have been rising together and today they fell together however, this correlation doesn't hold always. The metal markets have corrected the past 2 months from their highs leading me to be more bullish on them over the general market simply because the market has just gone straight up without digesting gains.  This means that when sell pressure flocks to the markets a deep correction could be in the works baring any QE3 talk... June is the end date to the QE2 program so expect discussions to get heated as this deadline approaches.

What else can be said.... Silver Silver Silver. GPR - Great Panther Resources

Thursday and Friday showed the true strength of silver over a 5% gain.  I have an Andrew's pitchfork showing trend channels and as you can see we burst above the top channel on Friday.  The retest of the center line will be watched carefully, as it could be an additional entry opportunity on a bounce.  breaking of this line would probably result in a retest of the 20 day MA.


Targets for silver:

Targets for Silver vary, however my ultimate target is hunt brothers high of around $48-$50.  However, there could be a stall of the rally around $40.  Silver has inflation hedge written all over it, but also very useful in industry.

The main theme of this blog is mining stocks, which I have been following through out.  One I have written about is Great Panther Resources, (TSX: GPR).  

Currently GPR is trading at all time highs (at least highest since 2002).  This small cap mining company has the potential to do what other stocks I have been following such as FVI, AXR, EDR, FR have done.  This stock is currently in my portfolio and quite happy with using it as a proxy for investing in the silver market.

Maple Leaf Foods (TSX: MFI) Q4 Earnings and Annual report 2010

Maple Leaf Foods, is out of the scope of my normal mining  / index / currency focus, however with corn, wheat, and other food commodities making new 52 week highs, putting a food packaging company (mostly meat) into a portfolio could be interesting.  Coincidentally a friend of mine is doing a project requiring a look at this type of stock.

What makes Maple Leaf Foods more exciting as a mid-term trade (3-6 months) is that the Ontario teachers pension fund dumped their holdings last November.  This can be seen by the massive red volume spike on the graph below.  The stock has held on relatively well is above key moving averages.  Technicals on both the daily and weekly time frames look relatively bullish.  And for the kicker.... February 24th, 2011 is Maple Leaf Foods earnings announcement for the 4th Quarter of 2010 and their annual report for 2010.

First thing to notice is the Gap down that occurred in November when the pension fund dumped their holdings. The top of the gap has the potential to be short term resistance so if you were trying to short term trade this it would make sense to take 1/2 or full profit when this gap gets filled.

Moving averages.... What is significant about this stock is it is currently sitting on both the 20 day moving average and the 50 day..  Which should provide relatively strong support for any sell pressure that comes in.  The 200 day, is about 80 cents below the price, which is significant but should be again very strong support for this stock especially if food prices continue in their current direction.

Volume: not much to say as it has been distorted based on the pension fund selling their shares.  One thing to notice is the increase in buy volume coming in at the bottom in mid December.  These buyers will likely continue to buy at that level, therefore increasing support below the stock.

MACD: is a momentum study, the way I like to read it is two fold.  There is short term and long term momentum measured.  The former is measured by the histogram, the latter by the position of the MACD line.  The Histogram was recently negative and is almost flat, however, it is expected to start seeing increasing larger positive ticks over this week especially if earnings are solid.
The MACD line is trialed by a 5 day moving average named the Signal line.  Crossovers of the blue line (MACD) and the white line are buy and sell signals.   These cross overs occur when the histogram turns positive or negative as the histogram measures the distance between the blue and the white line.  Is the MACD line is above the 0 level the longer term momentum is bullish.  Currently the stock is looking for direction as it is directly on the 0 level.  The direction in my opinion will come from the annual report.

So why so bullish?  the Slow Stochastics shows momentum is up and the yellow line (K) is sitting at 27, which indicates that the stock isn't over sold or over bought but doesn't have much down pressure left.  There is plenty of room for this stock to run to the upside before getting over bought.

Now.... to put how important this week is for this stock, lets take a step back and analysis a weekly chart.

The yellow moving average on the chart is the 200 Week moving average.  This is a Monster level and last week the stock closed above it.  Generally you want to wait for confirmation an additional close above support to jump into the stock, however this is a weekly and their is earning announcement.  The fact that the stock is trading so close to this level means that this stock is a very attractive low risk entry as there is so much support very close (200w MA @ 11.29, 20d MA @ 11.51, 50d MA @ 11.43).  Therefore, purchasing this stock close to support and placing a stop-loss below these levels provides a relatively quick exit with high potential gains.
However, the 20 week moving average should be considered as it is trading above this stock at 11.78.

This moving average provides a more conservative entry as a way to entry into the stock would be waiting for a breach of this 20 week MA and placing a stop just below this level.

Last thing to mention is the slow stochastics on the weekly time frame is very encouraging showing momentum up and lots of room for this stock to run before it becomes over bought.  Since the weekly chart looks so attractive as well, this is why i would classify this stock as a mid-term trade and potentially long term depending on your style.

Potential targets..... well the 11.78 next week could be the likely target sitting 20 cents above the current price, which would be a 1.7% gain.  However, longer term target would be the top of the gap at 12.38.  At that stage it would be likely to see a pull back before making a run to $13 and possibly $15 over 6 months or so.