Once each week on BMR, our technical analyst highlights a junior resource stock (outside the BMR Portfolio) that shows very favorable chart patterns. Investors/traders of course should perform their own due diligence, as always, and consider fundamental factors as well. This weekly feature is merely meant to introduce some possible opportunities that readers may wish to investigate. This morning, John takes a look at Timmins Gold Corporation (TMM, TSX-V) which is actually a good example where fundamentals and TA work well together:
John: Timmins Gold Corp. (TMM, TSX-V) is at a significant point in its development as a junior gold producer. In a recent news release, Timmins announced production statistics for the months of April and May from its wholly owned San Francisco open-pit mine in Sonoro, Mexico. The following is a quote from that news release:
“Commercial production commenced in April, 2010. During the month of April, a total of 2,666 ounces, and during the month of May, a total of 3,657 ounces, for a total of 6,323 ounces of gold, were poured and delivered to the Johnson Matthey refinery in Salt Lake City, Utah. The projected sales for June are 3,200 ounces and thereafter sales are projected to increase by 1,000 ounces per month until they stabilize in excess of 9,000 ounces per month in December. A total of 14,364 ounces of gold and 8,669 ounces of silver have been sold for the period from December 1 to the end of May.”
Looking at the chart we see that there was a breakout up through the $1.20 level at the beginning of December, 2009, and since then TMM has traded within a 30 cent horizontal trending channel between $1.20 and $1.50 (two horizontal blue lines). An inner channel support (blue dotted line) has been drawn and this provides a band of support between $1.20 and $1.25 (right around the 200-day SMA). It is expected with the present weakness the $1.25 level will be tested in the near future. When a breakout above the $1.50 level occurs, the next target will be $1.80.
Looking at the indicators:
The ADX trend indicator has the +DI and the -DI criss-crossing and the ADX trend strength (black line) low, confirming the trend has been weak during this 7 month consolidation.
The Slow Stochastics %K (black line) crossed over the %D (red line) above the 80% level, and both lines are falling rapidly. This indicates the present weakness will continue.
The Chaikin Money Flow (CMF) indicator is still bullish (green bars above zero) but are falling toward the zero line. Buying is getting weaker.
Outlook: At the present time the stock is somewhat weak but news in July confirming that the projected 3,200 ounce sales target for June has been met or exceeded could add a lot of strength to this market. This would also bring credibility to the future targets as expressed in the June 24 release. This is a stock with a lot of potential.
