John, BMR’s chart wizard, has made two more dazzling calls with a low on Gold at $1,300 and a bottom on the CDNX of 2200. When many were panicking near the end of January, we were telling our readers not to flinch and use the weakness to look for some fabulous opportunities in quality junior resource stocks. The CDNX, which has proven to be the #1 leading indicator of the future direction of Gold prices, confirmed to us last month that Gold simply wasn’t about to collapse and in fact could reverse quickly and dramatically to the upside.
With the CDNX smashing through resistance at 2300, things are now about to get really interesting. John has provided an updated CDNX chart analysis this evening with a new Fibonacci target level of 2790 (see below).
In the coming days John will be highlighting some individual companies with particularly favorable charts, one of those being GoldQuest Mining (GQC, TSX-V) whose new Chairman, Bill Fisher, was interviewed by BMR earlier today (a classic example of technicals and fundamentals perfectly in sync).
John: The CDNX gapped up at the open from Wednesday’s close of 2324 to 2331, then closed the gap before climbing to its high of 2364 for a gain of 40 points (1.71%) – another powerful bullish move.
Looking at the 3-month daily chart, we see that on November 18 Wave #1 of a bullish motive phase began and continued until December 6 when corrective Wave #2 began. This was of 8 sessions’ duration before the uptrend Wave #3 began. As expected this was a long wave and took the CDNX from a 2100 low to the 2300 level. Then Wave #4 started and the trading pattern for this wave is a horizontal trend channel which began in the first week of January and lasted until Jan. 25. The volume was fairly constant over this period of distribution. Distribution is the street’s way of supply overcoming demand – it takes time and a change of ownership of a large number of shares. This horizontal trend channel is shown with the blue horizontal top line as resistance at 2300 and the bottom green dotted line is support at 2200. On Jan. 26 the white candle signaled the start of Wave #5 which is looking very powerful. We’ve had bullish white candles the last 5 trading days and the volume has been increasing over the last 4 sessions. Combining increasing volume with a rising Index creates a very bullish scenario.
Also note from this morning’s chart the next major resistance level is at 2450 and the Fibonacci target is at the 2790 level (this is not a BMR price target as we don’t give price targets but a theoretical Fibonacci level based on technical analysis).
Looking at the indicators:
The previous RSI overbought condition has been completely unwound. It has broken above the down trendline (orange). It’s at 69% and pointing up – very bullish for Wave #5 to continue.
Chaikin Money Flow: During the last 3 days of Jan. the buying pressure was very low but has increased the last 3 sessions – very bullish.
The ADX trend indicator has the +DI (green line) at 44%, pointing up and above the -DI (red line) which is pointing down. The ADX trend strength indicator (black line) is flat at 29% – very bullish scenario.
Outlook: The CDNX is showing considerable upside strength. Combining that with the present bullishness of Gold and Silver, I see an extended run- up for the near future.
Thanks for all you guys do with keeping us informed with technical and fundamental info, plus the occasional hand holding, I have not been here very long and it amazes me with all of the info you guys provide and you do it so far at no cost, that is amazing! I look back at how I found you guys and I cannot remember, but after seeing your statement of faith I know. God Bless you and your families.
Greg
Comment by GREG H — February 3, 2011 @ 11:48 pm
+1
Comment by Herb — February 4, 2011 @ 1:43 am
+2 🙂
Comment by Jeremy — February 4, 2011 @ 5:51 am
The only issue I have is that although we are entering the 5th and final Wave of an elliot wave theory …what if your stock picks don’t correlated or move in similar fashion to the CDNX? Currently alot of the picks are still finding a base or consolidating (besides GQC). After the 5th Wave does that mean that you will be selling the gold stocks? This final wave worries me even though its the most powerful wave.
What’s your strategy going forward? Please advise.
Comment by Andrew M — February 4, 2011 @ 6:34 am
Hi Andrew
Although the 5th wave is the final wave of a particular motive phase it is not THE END. A fifth wave can have extensions before ending at the start of a corrective phase. When a corrective phase starts it will be to unwind an overbought condition which is good. This is the way a bull market works. The end of a fifth wave does not automatically mean we will experience a bear market. We judge when to sell a stock based on its own fundamental and technical situation. Hope this helps
Comment by John - BMR — February 4, 2011 @ 6:55 am
John – Thanks for your comments. I guess I’m not saying that the bull market is ending I’m just trying to get ahead of the curve to ensure I have an appropriate market strategy in hand so that I don’t get burned in the small caps just like last year. Don Coxe also mentioned that by mid year there might be a reversal in the market due to revised GDP figures in the US. However, we should all embrace this last wave because it is most powerful.
Comment by Andrew M — February 4, 2011 @ 7:33 am