Once each week at 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 carefully review 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 a company called Excel Gold Mining Inc. (EGM, TSX-V) which has the right address – Quebec – and is developing a very interesting near-surface gold, silver and base metal deposit:
With strong buying pressure Friday, Excel appears ready to try to break the resistance band (16.5 to 17.5 cents)...
John: This morning, “Technically Speaking” examines Excel Gold Mining Inc. (EGM, TSX-V). Excel is focused on developing its 100% owned Montauban Property, a former producer (gold, silver and base metals) with near-surface mineralization. Excel has assembled a strategic land package (Batiscan 1, Batiscan 2 and Castellane) consisting of approximately 130 square kilometres surrounding the 77-hectare former Montauban mine.
Excel has expanded its exploration plans for Montauban and surrounding areas for the second half of this year after reporting very encouraging results from a recent 1500 metre shallow drill program. The average depth of each hole was only 30 metres, and highlights included 4.10 g/t Au and 16.49 g/t Ag over 9 metres; 3.78 g/t Au and 28.26 g/t Ag over 8 metres; and 3.13 g/t Au and 13.70 g/t Ag over 8 metres. Zinc and copper were also intersected in some of the holes.
The company believes Montauban has considerable upside exploration potential given the fact that the bulk of drilling historically on the property has only been to a depth of 200 metres with very limited drilling below that depth.
At BMR, we’re well aware of the potential of situations like this – a former producing mine in Quebec with near-surface mineralization and a large land package surrounding it that probably has never been properly explored (i.e., Osisko, Gold Bullion, etc.).
Now let’s take a look at the very interesting Excel chart to find out what the technicals are telling us here.
On Friday, EGM opened at 15 cents, drifted lower to 14.5 cents, and then rose to close at 16 cents – the high for the day – for a gain of 1.5 cents on volume of 1.3 million shares.
Looking at the 6-month daily chart we see that EGM broke out of a 5 to 7 cent consolidation in June, powered higher to 15 cents, consolidated in a downsloping flag to a low of 10 cents and gradually climbed back to a new high of 17.5 cents. It then consolidated with declining volume until Friday when the volume showed a sharp increase to 1.3 million shares.
In May it broke above its 50-day moving average (SMA) which has now turned up and is providing support. All the moving averages are in bullish alignment and the 20-day SMA (currently 14.5 cents) has provided excellent support since this stock started its move in early June.
Although Excel is in the early stages of an uptrend I have drawn in an upsloping trading channel (as noted with the top blue line resistance and the green lower line support). I have also shown a resistance band (2 horizontal lines).
Looking at the indicators:
We see the RSI has been above 50% since June 1 and on Friday it turned up with a considerable way to go before becoming overbought – very bullish.
The Slow Stochastics shows the %K (black line) has crossed above the %D (red line) and is at 55%, thus it is not near the overbought region – very bullish.
The Chaikin Money Flow (CMF) indicator is above the zero line (green) and shows that the buying pressure started on July 28 (thin blue vertical line) and is now at .268 which is quite bullish.
The volume increased dramatically on Friday, giving an early indication of more buying pressure to come. In order to break through the resistance band the volume must increase and stay high.
Outlook: With the strong buying pressure on Friday, the stock appears to be ready to try to break the resistance band (16.5 cents to 17.5 cents), which could lead to a significant breakout, so we can expect heavy volume at least at the beginning of the week. Given its very favorable chart patterns, and the fact is is exploring a property of merit in Quebec, Excel needs to be watched closely and is deserving of further due diligence.
