GoldQuest Mining (GQC, TSX-V) is one of our favorites with an exceptional portfolio of Gold properties in the Dominican Republic where it has been active for a decade. GQC also holds the Toral Project (zinc, lead, silver) in northwest Spain with a 43-101 resource estimate due on that deposit in the near future (the historical estimate is in excess of 5 million tonnes grading 9% zinc, 6% lead and 45 g/t Ag). For more information regarding the fundamentals with this company, we suggest you read Part 2 of yesterday’s Week In Review which goes into some detail. This morning, John examines the technical health of the stock after a recent pullback and loves what he sees:
John: On Friday, Goldquest Mining (GQC, TSX-V) opened at 22 cents, its low, then rose and closed at its high of 24 cents, up 2 pennies on CDNX volume of 343,000 shares.
Looking at the 6-month daily chart, we see that the bullish uptrend started at the beginning of September as the stock rose from a low of 11 cents to a high closing of 31 cents on Oct 8. Then for a couple of weeks it retraced to 50% within a downsloping channel to bottom at 21 cents (the Fibonacci scale shown in blue horizontal lines cannot indicate 3 significant figures, so half- cent values cannot be shown). This retracement to 50% is perfectly normal and has completely unwound the previous overbought condition forming a very solid foundation for another bullish move (green dotted line). Friday’s trading created a breakout above the downsloping channel and pushed the price up 24 cents which is resistance at the Fibonacci 61.8% level. The next Fibonacci target is 40 cents as shown on the chart. The EMA(20) provides very close bullish support and the SMA(50) provides long-term support. The EMA(20) is flat and Friday’s move broke above this moving average so GQC is now trading above both moving averages with the SMA(50) pointing up – a very bullish scenario.
The volume over the last 2 days has doubled from that of the previous 2 days which is bullish. An increase in volume often precedes an increase in price. I fully expect to see a far greater increase in volume in the near future.
Looking at the indicators:
The RSI has completely unwound the recent overbought conditions and is pointing up at the 55% level with plenty of room to move higher before becoming overbought again – very bullish signal here.
The Slow Stochastics shows the %K (black line) at 18% has just crossed above the %D (red line) at 15% with both lines pointing up – very bullish. The ADX trend indicator shows that during the retracement the +DI (green line) declined but did not cross down over the -DI (red line) which kept the uptrend in force. Now the +DI is pointing up and the -DI is pointing down, showing a reversal has taken place. The ADX (black line) trend strength indicator is still pointing down at the 36 level but this is of no concern because the ADX line always lags the action of the +DI indicator. These indicators are in bullish orientation.
Outlook: Seldom does one see a situation as bullish as this one. The overbought is completely unwound and a reversal is in place. All indicators and chart patterns are in bullish mode with an expected increase in volume. Everything points to a serious move up toward the Fibonacci target in the near future.
