BullMarketRun.ca

From Rouyn-Noranda, Quebec, 8:30 am Eastern

Yesterday, we stated the fundamental case for Abcourt Mines Inc. (ABI, TSX-V) which has a promising Gold property just north of Rouyn-Noranda and a silver-zinc deposit near Val d’Or that contains almost 20 million ounces of silver and nearly 300,000 tonnes of zinc (NI-43-101 reserves and resources, all categories).  Both properties are former producers and are currently being drilled to upgrade and expand resources.  The company has $4 million in cash, no debt, significant infrastructure at both sites, and a current market cap of $24 million.  Given the extent of Abcourt’s precious and base metal resources, the current valuation is very modest and provides investors with tremendous leverage to potential higher Gold, silver and zinc prices.  As a result, we have added ABI to the BMR model portfolio at 20 cents.

This morning, John examines a 10-year monthly chart for ABI which gives a very bullish technical picture and really puts things into perspective in terms of how this intriguing situation is rapidly developing.

John: Yesterday, Abcourt Mines (TSX-V) gapped up to 20 cents at the open from Friday’s close at 18.5 cents.  It reached a high of 22 cents before closing at 21.5 cents for a gain of 3 pennies (16.22%) on strong CDNX volume of 3.6 million shares. Yesterday’s trading caused the price to break to the upside out of a 2.5-year horizontal trend channel.  This indeed was a major move.

The purpose of the 10-year monthly chart above is to put into perspective the recent trading with the rather long history of the company and can be useful for future reference.

Looking at the chart we see that in 2001, ABI traded between 5 cents and 10 cents on light volume.  In 2002, interest increased and the stock moved to a high of 18 cents.  But it was not until the first quarter of 2004 that the stock price broke above 18 cents to around 25 cents and then proceeded to creep up until in 2006 it reached a high of nearly $1.40.

After that big move in 2006 (the stock soared 800% over 9 months), a steady decline set in until ABI bottomed out at 9 cents during the third quarter of 2008 in the midst of the market crash.  Since then it has traded in a horizontal trend channel mainly between 9 cents and 18 cents.

Beginning last month, we started seeing a huge (record-setting) volume spike in Abcourt which is ultimately what drew our attention to the stock. These type of volume surges often precede powerful moves.

On the chart I have shown the Fibonacci retracement levels for the decline from the 2006 high to the 2008 low (86, 71 and 57 cents, respectively).  These are resistance levels to any future upward moves in price. In addition I have shown the next two immediate Fibonacci target levels at 24 cents and 33 cents (these are not BMR price targets as we don’t give price targets but theoretical Fibonacci levels based on technical analysis).   Strong support at 18 cents and lower is shown by green horizontal lines.

Looking at the indicators: Both the RSI and the Slow Stochastics are bullish, above 50%, and climbing.

The Chaikin Money Flow (CMF) indicator shows very strong buying pressure during December and January – very bullish.

Outlook: Both the fundamentals and the technicals show that this stock has tremendous potential to move much higher and where we are now appears to be just the beginning.

Note:  The writers hold a position in ABI.