As regular BMR readers know, we have become quite familiar with the Cadillac Trend in northwestern Quebec over the last year after our discovery of Gold Bullion Development (GBB, TSX-V) and having closely followed its success. Without a doubt, northwestern Quebec is one of the best places in the world to be exploring for Gold given the geological dynamics of the Cadillac Trend and the political environment as Quebec has consistently been ranked as one of the top three jurisdictions in the world for mining and exploration.
During our recent visit to Rouyn-Noranda we became much more familiar with a company by the name of Visible Gold (VGD, TSX-V). We met with President and CEO Martin Dallaire and got a good feel for the direction this company wants to go. Visible Gold is sitting on approximately $9 million in cash and has already laid out plans for $6.5 million in exploration this year at its various properties in northwestern Quebec (it’s entirely focused on the Cadillac Trend). Drilling has already started at one property (Silidor) and is expected to ramp up considerably over the next couple of months with a total of 40,000 metres planned for 2011 (we wouldn’t be surprised if that number goes higher).
Dallaire, who lives in Rouyn-Noranda and knows the area like the back of his hand, is young and full of energy and has recruited an outstanding geological team which includes senior geologist Robert Sansfacon who played a key role in the discovery of Osisko’s (OSK, TSX) Canadian Malartic deposit.
With a strong treasury and a very capable team on the ground to make things happen, we believe Visible Gold is one of the most attractive opportunities at the moment among companies exploring along the Cadillac Trend. VGD is certainly worthy of our readers’ due diligence. Below, John takes a look at Visible Gold from a technical perspective:
John: Friday, Visible Gold Mines opened at 41.5 cents, touched 41 cents for its low of the day, and then strengthened to close at its high of 45.5 cents on CDNX volume of 608,000 shares. For the week it gained 9 cents (24.66%) on total CDNX volume of nearly 1.6 million shares.
Looking at the 1-year weekly chart, we see that after trading mainly in the 15 cent to 24 cent range for the first half of 2010, VGD started to move up on increased volume at the beginning of August. Over a period of 18 weeks it reached a high of 70 cents in November. From there it started a decline that took it to a low of 34 cents early this month. Since then it has recovered into the mid-to-upper 40’s. As of 8:00 am Pacific, VGD is up a further 2 pennies at 47.5 cents.
The chart shows that after the flagpole that started in Aug. there was a 13-week distribution within a horizontal trend channel (top resistance is a broken blue line and bottom support is a broken green line). This support was broken in early January and the stock declined until it formed a “Morning Doji Star” candle pattern in the last three weeks. This pattern is a bullish bottom reversing pattern that derives its name from Mercury, the morning star that appears in the heavens just before sunrise. For the reversal to be complete it requires confirmation by this week’s trading being bullish.
The blue Fibonacci set shows the seed wave is from a base of 15 cents to the 100% level of 59 cents. The Fibonacci target is at 86 cents (this is not a BMR price target as we don’t give price targets but a theoretical Fibonacci level based on technical analysis). The decline bottomed out at the 37 cent support level which coincides with the Fibonacci 50% retracement level. This was a normal retracement. The volume for last week was nearly 1.6 million shares which is the highest weekly volume since October. The three main resistance levels to a new uptrend will be at 50 cents, 59 cents and 65 cents. The close supporting moving average is the EMA(10) which is flat and near Friday’s close of 46 cents. The combination of the bullish candle pattern, the reversal at the 50% Fibonacci level and the increasing bullish volume makes this chart look very interesting for the coming days and weeks.
Looking at the indicators: The RSI has completely unwound the September to Nov. overbought condition and has reversed direction from the 40% support level (orange line). The RSI is bullish at 51% and pointing up and has broken above its trendline (thin orange line) – very bullish.
The Slow Stochastics has the %K (black line) at 13 and above the %D (red line) at 10. This scenario is very bullish for a strong price reversal.
The Chaikin Money Flow (CMF) shows the buying pressure is now increasing after being low during the first two weeks of the reversal pattern – very bullish.
Outlook: VGD is in the process of completing a reversal pattern which is well supported by the indicators. The potential for a powerful move to the upside over the next several weeks is very strong. As always, do your own due diligence but we believe you’ll like what you’ll see with this company.
Note: John does not currently hold a position in Visible Gold (Jon does).
