John: Yesterday, Cadillac Mining (CQX, TSX-V) gapped up a penny on strong volume to 30 cents, rose to a high of 31.5 cents, slipped to a low of 27 cents and then staged an impressive recovery to close at 31 cents, a gain of 2 pennies (6.9%) on CDNX volume of 388,000 shares. This has been a BMR favorite since early December when we introduced it to our readers at 23 cents. It surged to a high of 50 cents by early January, retraced to a low of 21 cents February 3, and now appears to be in the early stages of a powerful comeback or new uptrend thanks in part to a major increase in 43-101 resources for Richmont’s Wasamac Property. The structure hosting Gold mineralization at Wasamac is believed to dip northward toward ground held 100% by Cadillac. In early trading this morning (as of 6:45 am Pacific), Cadillac is off 2 pennies at 29 cents but the chart is looking potentially explosive.
Looking at the 4-month daily chart, we see that after the flagpole (from November 25 to December 13) the stock traded within a horizontal trend channel between 32 cents and 42 cents from Dec. 14 to Jan. 19 (between vertical orange line and vertical blue line) except for a bull fake on Jan. 4 when the price reached a high of 50 cents only to retrace to trade within the channel.
On Jan. 20 CQX broke below the 32 cent level and between then and now has traded within another horizontal trend channel between 24 cents and 32 cents. The trading in the last 2 days has been bullish (2 white candles) with an increase in volume each day. Previous to Wednesday the average daily volume had been decreasing due to consolidation.
The black Fibonacci set with a seed wave between 7 cents and 42 cents indicates the next Fibonacci level is at 63 cents (we caution that this is not a BMR price target as we don’t give price targets but a potential and theoretical Fibonacci level based on technical analysis). There is strong support (horizontal green line) at 24 cents which coincides with the Fibonacci 50% retracement level. The next main resistance levels are at 32 cents and 42 cents. Yesterday’s trading put the closing price above the supporting EMA(20), a very bullish sign.
Looking at the indicators:
The RSI has broken above the 50% level. At the close yesterday it was sitting at 54% and pointing up – bullish.
The Chaikin Money Flow (CMF) indicator shows that since the beginning of February the selling pressure has been declining and today the buying pressure was bullish, another very positive sign.
The ADX trend indicator has the +DI (green line) at 22 and pointing up and above the -DI (red line) at 17 and pointing down. The ADX (black line) trend strength indicator at 17 is pointing down but flattening out, indicating a weak bullish trend.
Outlook: The chart pattern, volume and indicators all point to Cadillac attempting to break above the top of the channel at 32 cents in the immediate future. As always, perform your own due diligence.
Note: The writer holds a position in Cadillac Mining.
Thanks a lot for this chart, John! I feel very very comfortable holding this company.
Now on a technical note. You seem to sometimes use the SMA’s and sometimes the EMA’s. Are there actually rules for when to use an EMA over an SMA or vice versa?
Comment by Thomas — February 18, 2011 @ 7:44 am
Thanks a lot for this chart, John! I feel very very comfortable holding this company.
Now on a technical note. You seem to sometimes use the SMA’s and sometimes the EMA’s. Are there actually rules for when to use an EMA over an SMA or vice versa?
Comment by Thomas — February 19, 2011 @ 7:35 am
Hi Thomas
I am sorry I did not answer yesterday but I was traveling all day.
I have never seen a “rule” but I prefer the the EMA when I am looking at the recent trading sessions…looking for a reversal etc. because the EMA is more sensitive to recent trading than is the SMA. SMA moving averages for me are good for trend support.
I hope that helps.
Comment by John - BMR — February 19, 2011 @ 9:43 am