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The intention of this article is to educate and
update on mining investment and the precious & base metals before we
finally start the second half of 2007. Conditions have been strong in the ASX
mining sector over the part few weeks which indicates very interesting events
directly ahead. Gold & silver have been pretty boring the last few
weeks as they range sideways – as expected. The base metals are
consolidating and nickel got flushed out nicely, now looks like a clean market
according to Colin Emery who is our GoldOz Newsletter contributor. Firstly
some fun with investment criteria for making profits from mining shares.
How to choose mining stock trades
The buttons that get investor interest can be
reviewed for more experienced market players and summarized for new and less
experienced investors as a group of “P” words - just like it is
done in the “so called” secrets of property investment… Position,
Position and Position. Except in mining share investment it is much more
interesting. Now before you say that is Pretty Pathetic let me explain
that some Particularly Perplexed Punters have Pleaded with me to Provide some
Practical Pointers for Predicting the Perfect Price Parabola. Firstly
you need a good general knowledge of the stocks on offer and a good sized
short list to work with – then a measure of Patience and Persistence.
Picking the short list
Let me emphasize Management because if they are not
Prudent they can get the company and your investment into trouble; look at
the hedge disasters of yesteryear with hidden early trigger clauses, mining
is tough and Management have to stay ahead of the game which takes a good
team and experience. They must have Presence within the industry to
inspire respect and gain institutional support and they must have Potential
as viewed from this perspective. If they have Proficiently
Produced operational mines in the past they will have a reputation for this.
Next thing required is a good tenement address, the
mining Province, yes there is that real estate term and it does relate to
Position along strike from known reserves and mines. It helps greatly
if the metal being sought is Popular at the time, a hot sector with
momentum. Trading conditions are Paramount
to your investing success. Giant economic deposits in the area are a
big plus for gaining interest when results start to come in, especially if
they belong to the company of course.
Now the beginning of price parabolas:
Now the main ingredient that generates excitement
may just be Promotion and it is a highly significant factor make no mistake
however there has to be a good story to promote so you need Progress to
attract the Punters. These two are really key buttons and the progress
component can take many forms such as drilling progress, resource definition
and step out resource expansion progress, new tenement prospects acquired,
exciting new joint venture agreements, decision to proceed to a full
feasibility study and progress towards a decision to develop a new mine.
It can also be Progress towards increased Production or Production itself
however this must be Profitable so high grade Prospects are Preferred.
Investors want to see Profit Potential most of all
so when all of the above P’s are combined you get a Precedent for magic
investment conditions. Look… that is just a bit of fun really however
there is much truth and novice investors can view a company report and see
some high grade grab samples and assume this indicates Potential however it
does not. Samples are selected carefully from the terrain during a ground
survey and such rocks can be transported over great distances and even from
other tenements nearby.
A few Percussion drill results may also look good
however the chances of the company finding an economic deposit are small and
much of the “P” conditions above have to be “going”
for the company for this to have much effect. So consider the Precision of
the “P’s” when you are looking at fundamental causes as to
why Prices Perform.
Enough of that, now for something completely
different:
OK now to a specific issue close to my heart and
that is a small gold and nickel stock I selected as a perfect example of
small cap potential. A bonus report was sent to my first thousand clients
through the second half of last year and I have closely followed their
progress from the 4.5c level. They hit 12.5c last week and I am delighted to
say there appears to be further upside so investors who liked the story and
decided to invest have done extremely well. Not bad during a gold
consolidation – as I said; many of the ASX PM stocks Down Under are
stupidly undervalued.
The business of writing these reports and these
articles too - is fraught with risk because you are writing about potential
outcomes. You have to anticipate the future through careful analysis of the
past and present (aren’t you glad I knocked off the capital P joke by
now??). You stick your neck out to report on your findings as this is a
public forum and it is a great pleasure to see investors profiting from your research
- enough said. This is why I sell my research; so that these kinds of
opportunities see the light of day for more investors.
General conditions
The ASX has been fertile ground for investors since
I started writing publicly and the current conditions are strong even
throughout the normal horror May - June period – they have been
surprising so lets take a look at what has been happening. Conditions
have been fantastic since the beginning of the year and this should continue
over the coming months if my analysis remains correct. May I make
the point that the most heavily promoted newsletters and advisors (big names
Down Under) got it wrong for the first half of 2007 in Australia and I
got it right – again very pleasing. I feel it has something to do with
a fresh approach and that the game conditions have changed so the big names,
although very bright guys - they got caught out this time.
One other guy that did not get it wrong either,
which is why I have formed a close association with him – is Colin Emery.
Here is also a general snippet on the top 300 Australian silver, gold &
mining shares from our GoldOz Weekly Newsletter by Colin Emery…
“Now last week I had the above chart in the
box- of its recent consolidation and a little blue arrow and said – Its
now broken out of this box after a good sideways correction ands that it was
a break out to look for new highs and may pause but then will look retrend
– this is what it did despite all the noise and panic elsewhere –
it did a dip back but as you can see straight back up to the previous high
this a.m. which it is testing and should keep searching the blue sky and new
highs. As I said buy the break and buy dips….and the metals and miners
index above chart shows you that despite the media’s best attempts to
worry you thing when you stand back and have a good look are not that bad at
all.
Yep that’s right that I have said that now two
weeks or more in a row…and it’s been dead right…and
I’m still sticking to it – it’s a very clean break and
although pullbacks will occur these should be bought – but here’s
the chart….
S & P 300 - ASX 300 Metals and Miners Index
Not much more I can say – the Miners and Minerals Index has
broken up and out from the box and now the edges of the box 1 and 2 is a main support area and
will be hard to be broken. A reversal pattern is circled and that’s
also a support area – and note; the high support of that is line 3. Buy
on supports and if we ever see it back in the box look to buy – exit if
the bottom box line 1 is broken as can drop back to next major supports at
lines 4 and 5. But we may not - this index can look for new highs for a while
before consolidating or correcting. I have a first target of 4700 now –
Note RSI is nearing overbought – so some profit taking can be expected.
This may take the form of lower BHP and RIO
prices as they are the big two in this index however we still have some
beautiful opportunities covered in the current issue of the Newsletter bumper
edition out today and tomorrow. The whole sector does not need correction
only some stocks so there is ample opportunity here.
Now gold and silver
technicals…
Gold neared its 300 day moving average once again last week, it now
supports the gold price from US$640. It also touched the 40 week MA
(200 day moving average) which has now turned up above the 60 week MA (300
day MA) The weekly RSI has just crossed over the 50 level and I am expecting
a near term test of the US$690 level in the next 4-8 weeks, possibly the
US$720 mark but don’t expect it to sail through this level without a
fight. It looks like it has to test and correct a little and then retest
before we really get underway. If we go below $620 for more than a
couple of days we have to reassess this market.
Silver – if $12.55 goes we could see a drop to the $11.65
support but resistance is at $13.55. Colin sums it up perfectly – this
market has lost momentum and it would take news to change this so add
slowly. Colin thinks in fairly short time frames and so this is short
term – a few weeks may change this completely; we have to wait for a
meaningful break. The rally is off if the $11.65 area is seriously breached
for a few days – not an expected outcome.
Copper is closing on a triangular apex at US$340, zinc is not far off
supports and nickel has a newer more gentle upslope to follow now the spec
funds have been removed – full details on all the base metals as always
for subscribers.
Things are getting back to normal at GoldOz as I have been away from
the office for 4 weeks now – back into full action very
soon. Last remaining discount positions for our GoldOz Weekly
Newsletter are available through our new secure store and we take requests
for ASX resource stocks if you want them covered by a leading specialist with
elite level international experience.
Knowledge is power – you can also get the PDF set for a broad
range of 310 companies Down Under, get the data you need to make awesome
investment decisions for the second half of 2007 – annual subscription
is just AUD$99. Go to www.goldoz.com.au
, new data on investment education is added as often as I can.
Good trading /
investing.
Regards,
Neil
Charnock
Editor, Goldoz.com.au
REGISTERED ADVISOR
– WHO THE ADVICE COMES FROM IN THE GOLDOZ NEWSLETTER:
Colin Emery is
currently a Branch Manger and Senior Client Adviser of a Stock Broking
Company in Queensland Australia.
Prior to his work in Share broking he spent nearly 20 years in Senior
Management and Trading positions in Treasuries for major International Banks
such as Bank Of America, Banque Indosuez, Barclays Bank, Bank Of Tokyo and
Deutsche Bank AG. He spent a number of years as a Senior trader in New York, London, Singapore, Tokyo
and Hong Kong with these institutions. He
also was Global Head of emerging energy, emission and commodity products for
the leading Energy and Commodities brokerage firm of Prebon Yamane Ltd
– Prebon Energy for four years before moving to Cairns in 2003 to focus
on the Stock market and Private consulting work. The private consulting and
advisory work currently undertaken is with companies involved in Resources,
Energy and Renewable Energy and Forestry.
Neil Charnock is not a
registered investment advisor. He is a private investor who, in addition to
his essay publication offerings, has now assembled a highly experienced panel
to assist in the presentation of various research information services. The
opinions and statements made in the above publication are the result of
extensive research and are believed to be accurate and from reliable sources.
The contents are my current opinion only, further more conditions may cause
my opinions to change without notice. The insights herein published are made
solely for international and educational purposes. The contents in this
publication are not to be construed as solicitation or recommendation to be
used for formulation of investment decisions in any type of market
whatsoever. WARNING share market investment or speculation is a high risk
activity. Investors enter such activity at their own risk and must conduct
their own due diligence to research and verify all aspects of any investment
decision, if necessary seeking competent professional assistance.
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