BullMarketRun.ca

The CDNX rocketed 56 points higher today to another new 52-week high of 1872 (it closed at 1871).   As BMR readers know, we are not the least bit surprised by this incredibly bullish activity in the CDNX – we boldly predicted it.  What’s unfolding with the CDNX is a move of historic proportions (ultimately we could certainly see a new all-time high in the Index) fueled not only by rising precious metals prices but strongly driven as well by an overall commodities and resources “Super Cycle” that was merely just briefly interrupted by the 2008 Market Crash.   The world has changed as the 21st century unfolds and the “power shift” to the emerging markets (China, India, Brazil, Russia, etc.) is a hugely important “big picture” theme and a reality that investors need to fully grasp in order to maximize profits in the weeks, months and years ahead.

China has been on a huge resources grab around the globe over the last several years and the Chinese are also a major miner of many of the world’s critical minerals including rare earth elements.  In fact it’s believed China currently controls over 90% of the world’s production of rare earth metals which have become increasingly important in the scientific, environmental and industrial arenas and in our everyday lives (China now appears to be cutting back on exports of these metals, in part to meet domestic demand but also for other strategic reasons, which has drawn considerable attention and concern).

At BMR we focus a lot on the Gold sector but tonight in “Technically Speaking”, John examines the chart of Rare Earth Metals (RA, TSX-V).  Is this a case of showing up late to the “REE Party”?  We don’t think so, especially if you hold our view that the CDNX could power well past 2000 by early next year in a “Nasdaq-style dot-com” surge (too many people haven’t caught on yet to what’s really unfolding with the CDNX and the world’s growing hunger for minerals and resources).  We encourage our readers to do some immediate due diligence on Rare Earth Metals as it has a strong portfolio of properties and a healthy cash position ($7 million).  Today’s close of 45.5 cents gives the company a market cap of $33.5 million:

John: Tonight, Technically Speaking introduces BMR readers to Rare Earth Metals (RA, TSX-V) which opened today at 41 cents, its low, then rose to a high of 50 cents before closing at 46 cents for a gain of 6 cents (13.75%) on very strong CDNX volume of 3.7 million shares.

Looking at the chart we see that RA bottomed at 14 cents in early July and during the past 3.5 months has climbed in a steady and orderly manner to reach today’s high. Note how the daily EMA(20) provides close support for bullish moves and the daily SMA(50) provides long-term support. Both are pointing up and thus are in bullish orientation.

We also see that the last 16 trading sessions formed a downsloping flag and then today, on high volume, RA broke out above the top of the flag (blue line) to a high of 50 cents.   This flag has effectively unwound the overbought condition that surfaced in September. I have drawn in a resistance (horizontal blue line) at 52 cents which is in line with previous highs.

There are 2 Fibonacci Target levels shown, the first is at 54 cents and the second is at 78 cents.   With the first target being so close to a resistance level, the stock can expect to meet resistance between the 52 cent and 54 cent levels.

Looking at the Indicators:

The RSI has formed a “W” formation at the 50% level and is pointing up – very bullish. It has plenty of room to move up before becoming overbought.

The ADX trend indicator has the +DI (green line) above the -DI (red line) and pointing up – bullish. The ADX trend strength indicator (black line) has reversed its downward move and is pointing up, suggesting the strength of the bullish trend is increasing.

The Slow Stochastics has the %K (black line) above the %D (red line) at the 42% level and pointing up. There’s plenty of room for the stock to move up without becoming overbought.

Outlook: Rare Earth Metals should continue to move up if the volume remains high and it should also be able to overcome the 52 – 54 cent resistance band in the near future.  Given the bullishness of the overall market, RA has a good chance in the short to medium term of reaching the Fibonacci target of 78 cents.