07/10/06 - TraderMike: Keeping an Eye on Things
For some reason charts of the XAU aren't displaying the last fewdays of data correctly on all of the chart and quote services that I use. That's okwe can use the HUI instead. Both charts are in the same position. The HUI goldstock index and the XAU have both rallied up to their 50% retracement levels(the HUI doingso exactly). They have taken back half of the losses from the May peak to Junelow. This fifty percent retracement level is often a resistance level in themarkets, and especially with gold stocks for some reason.
Gold stocks seem to be pausing at this level. I would expect this week to be flat todown for gold stocks. You have to expect a pause at some point due to the huge runthey've have since June. The stocks need to consolidate their gains before movinghigher. It's hard to say exactly how long they'll pause. They couldquickly dip a percent or two(support is now on the 150-day moving averages for the HUI andXAU) and then go screaming back up again or else just trade in an extremely narrow rangefor two to three weeks. Some sort of consolidation is only natural though and theoverall big picture remains bullish.
In fact I'd like to add to my positions at the end of the consolidation period. Alot of you just froze up and sat on the sidelines after the June bottom. By waitingfor this consolidation to play out you'll be able to make a safe entry point too.
There have been some interesting news with some of the gold stocks I follow over the pastfew weeks. I talked about what is going on with Battle Mountain Gold and Eaglecrestlast week. I need to keep you up to date with the developments involving ParamountGold(OTC: PGDP). I haven't talked about it much, because over the past month I havebeen so focused on following the action in the gold market.
In May Paramount signed an agreement with Teck Cominco to create an "Andean GoldAlliance" consisting of 21 properties (10 in Argentina, 7 in Chile and 4 inPeru. The agreement, creates a strategic alliance between Paramount and Teck Comincofor gold exploration in these three countries. The alliance also provides for a mutualRight of First Offer with respect to the divestiture of new and existing gold explorationproperties over significant parts of Argentina, Chile and Peru.
Commenting on the Alliance, Alain Vachon, Paramount's Manager of Exploration, SouthAmerica stated, "I am very excited to be heading up exploration on such a highquality property portfolio. Over the last three years, Teck Cominco has staked more than100 targets using the latest technical exploration tools. In particular, Teck Cominco isone of the larger mineral claim owners in Argentina with more than 500,000 hectares and Ibelieve that Argentina is the most under-explored country in South America." Thenewest member of the Paramount team, geologist Mark Slauenwhite, formerly with BarrickGold, will be working directly with Alain Vachon on the AGA.
Teck Cominco also agreed to participate in a private placement financing in Paramount byway of the purchase of 117,750 units at a price of $4.25 each for a total value ofapproximately US$500,000, where each unit shall include one common share and one 2 yearstock purchase warrant exercisable at $5.00.
On June 28 Paramount announced that "based on data provided by Teck Cominco Limited,as well as field visits to Chile and Argentina, the Paramount team in South America haveidentified 5 high priority properties of which 3 are in Argentina and 2 are in Chile."
Alain Vachon, General Manager for Paramount in South America commented "Teck ComincoLimited is a top-tier major mining company and we feel very fortunate to be theirstrategic partner for gold exploration in South America. We have acquired a very goodportfolio of properties with significant upside potential and are confident that one ofthem will become a major discovery. Our plan is to aggressively work the 5 high priorityproperties we have identified over the next 12 months with the objective of proving up ageological resource. We have a team of geologists with the expertise to face such achallenge and this will be the key to our success."
Back in May newsletter writer Ron Struther's visited Paramount's San Miguel project inMexico. He wrote a full report with photographs that you can access here:
Paramount has done a lot since I first recommended it a year ago. Its gone from justone property and a geologist to a whole team of geologists and an alliance with one of thelargest mining companies in the world. It's one of the most exciting explorationcompanies in the Americas.
This week I plan on doing an analysis of the energy sector and another sector not onanyone's radar that appears to be starting a stage one bottom.
Top 10 Blue Chip Stocks With Market Caps Above$500 Million
Name Buy Date Buy Price
Yamana Gold(AMEX: AUY, Toronto: YRI) 5/05/06 $11.25
Glamis Gold(NYSE: GLG) 5/22/06 $33.55
Bema Gold(AMEX: BGO) 5/22/06 $4.75
Agnico Eagle(NYSE: AEM) 5/22/06 $32.45
NovaGold(AMEX: NG, Tortonto: NG) 5/30/06 $14.00
Southern Copper(NYSE: PCU) yields 12.90% at entry point 602/06 $87.60
Meridian Gold(NYSE: MDG) 6/02/06 $32.25
Eldorado(AMEX: EGO) 6/13/06 $4.21
Tanzanian Royalty Exploration(AMEX: TRE) 6/13/06 $6.40
Top 10 Emerging GrowthStocks With Market Caps Below $500 Million
Name Buy Date Buy Price
Paramount Gold Mining(OTC: PGDP) 4/24/06 $3.40
Eaglecrest Explorations(Vancouver: EEL) 4/26/06 $0.60
Battle Mountain Gold(OTCBB: BMGX) 4/27/06 $0.58
Blue Pearl Minig(Toronto: BLE) 5/09/06 $3.20
Alhambra Resources(Vancouver: ALH) 5/10/06 $2.78
Gold Reserve(AMEX: GRZ, Toronto: GRZ) 5/30/06 $7.27
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