Sunday, May 31, 2009

Another speculative gold pick

Gold had another good day on Friday and the gold stock charts I look at are all looking very strong. They always do, at tops, but they also always do at the beginning of longer-term trends. Which will it be this time?

Famous stock picker Sir Isaac Newton stated that a stock in motion will continue to stay in motion until it changes its motion.....or something like that. Which brings me to NovaGold.

NG - Daily

Again, we see the power of a rule-based technical analysis system that works, Blue Wave (there's a link to the Blue Wave site at the bottom of this blog's cover page).

NG - 120 Minute

Buying a stock in the middle of a Wave 3 advance is risky. But probably more risky then not buying it and waiting for a pull back. It doesn't take much more momentum to take a $5 stock to $7.50 and then to $10.00.

On the fundamental side, this blurb from Steven Leeb's newsletter was posted on the Yahoo message boards this weekend:

“This company currently owns 50% of one of the world’s largest undeveloped copper and gold deposits. Located right in North America, the deposit contains some 8.9 billion measured and indicated pounds of copper, plus another 3 billion pounds inferred. (Copper prices are likely to escalate sharply on any hint of an economic recovery.) More importantly, the deposit holds 7.3 million measured and indicated ounces of gold, plus 3.8 million ounces inferred.

“And that’s just one of the company’s properties. It’s second major property contains some 29.3 measured and inferred ounces of gold. At $950 per ounce, that works out to nearly $28 billion for this property alone. Yet, you could buy this entire company today for roughly $900 million.

“Of course, owning a deposit is one thing, producing the gold is another. But this company has attracted the attention of some pretty big players. A couple of years ago, when gold was selling for just $675, Barrick offered to buy this company for $15 a share.”
In other words, with Gold 33% lower at $675/oz, Barrick thought the company was worth $15, about three times today's share price with Gold at $980.

Two hours until game time, need to get ready, time for my pre-game skate and some stretching.



SteveK in L.A. said...

You can put a fork in the Penguins...

Anonymous said...

Allan you talk about the risk of buying stocks during a wave 3 advance, something I find hard to do. I usually like to buy on a pullback to a moving average. What percentage of breakout stocks do you think you lose by waiting for a pullback?

Allan said...

Think about all the extra decisions you have to make, with each one requiring its own issue of timing. First, you are assuming Wave 3 is over. If it's not, the stock price can go substantially higher while you wait. Then you have to decide when the pullback has ended. If wrong there, you end up either getting in way to early or waiting way too long again. So at least two or three extra decisions, all timing issues, instead of just one. How good are you?

Anonymous said...

Not that good.