Tomorrow's Trades (Today!), HUI miners index and US Dollar

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I would like to offer this update to the results of the Tomorrow's Trades (Today!) service I started 5 weeks ago and highlight a pair of new trades for tomorrow morning.
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I have recommended a total of 18 stock purchases in the past 5 weeks, each with a specific buy and sell price.  To date 9 of the trades have successfully closed, and 9 trades are still waiting for the suggested sell price to be hit.
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In this timeframe, the HUI mining index has appreciated 2.5% for an annualized gain of 26%. 
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If the 9 currently open trades had been closed at todays closing prices, with those results added to the 9 already successfully closed trades, the capital gain would be 5.3% for an annualized gain of 55%.  I made this calculation assuming that 10% of one's capital was devoted to each trade, and there were never more than 10 trades open at any one time.
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For the first five weeks of this service the results suggest that my trades have slightly more than doubled the performance of the HUI mining index.  So, I'm off to an OK start.

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I have a couple of trade ideas for tomorrow.  The first one is Cardero Resources Corp (CDY).
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Click on any chart to ENLARGE
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One of the "truths" of the True Strength Index (TSI) indicator is that when it is rising above the ZERO line, price is always rising. On this daily chart of CDY I have drawn a rectangle on the time frames that this "truth" was demonstrated.  With today's price action the TSI began to rise above the ZERO line and I think the odds are very high Cardero's price is now going to follow though.

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The other stock featured for tomorrow's trade is Endeavour Silver Corp (EXK).  Again I have identified the time frames when the TSI indicator was rising above ZERO with rectangles.  EXK appears primed to continue higher in the very near term.
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To read the details of tomorrow's trades click Tomorrow's Trades (Today!).
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To review the spreadsheet of past trade ideas and outcomes click see previous trades.

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This is today's daily chart of the HUI miners index.  The TSI indicator has begun to rise above ZERO and this bodes well for the beginning of a new rally in the mining stocks.

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Finally, a brief look at the daily chart of the US Dollar (/DX).  I am using this opportunity to demonstate the other "truth" about the TSI indicator.  And that truth is that when the indicator is falling below ZERO, price is always falling.  I have drawn a rectangle around those occassions on the chart.
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The US Dollar TSI has an overhead trend line that it needs to break if it is going to get into rally mode.  So far, quite the opposite is happening.  The TSI is gently rolling over under the overhead trend line and if/when it crosses down through the ZERO line, its bye bye US Dollar.

Which Way for the US Dollar Overnight?

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This is the US Dollar continuous chart (/DX) on a one hour view of the past 10 days with my standard True Strength Index (TSI) indicator (7,4) setting. 
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The trend line breaks of the TSI indicator did a very nice job of nailing 5 profitable opportunities to short the US Dollar within this timeframe.  It now appears that the TSI is about to signal a new opportunity to short the US Dollar.  I expect with this signal gold and silver will discontinue their fall of the last few hours and rally overnight.
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Click on the chart to ENLARGE
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I guess we'll see how it turns out in the morning. Good night.

True Strength Index (TSI) and the HUI Gold Bugs Index

Click on the chart to ENLARGE

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This is a daily chart of the Gold Bugs Index (HUI) covering the past 6 months.  The custom software I am using plots the True Strength Index (TSI) indicator reading below the price action of not only the HUI index, but also the individual mining stocks that are members of the index.
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I've put a lot of information on this chart but will slow it down and explain what is there.
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The buy and sell signals I have identified using my favorite TSI technique - the trend line break.  One simply connects the low points of the TSI indicator as it rises and when the indicator does not maintain that particular trend line, it "breaks" and yields a sell signal.  Likewise, a buy signal is generated by connecting the high points of the TSI as it falls. When the indicator does not maintain that particular trend line, a buy signal is generated.
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Along the lower portion of the chart I have identified when the TSI was mostly above ZERO, and when it was mostly below ZERO.  This is another excellent buy/sell technique to use. When the TSI is above ZERO and rising, price is always rising.  And, when the TSI is below ZERO and falling, price is always falling.
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The trend line breaks I identified did a very nice job of accurately and quickly locating the buy and sell swings.  Currently this technique is suggesting we are still on a buy signal.
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The ZERO line crossover also did a very nice job of accurately and almost as quickly locating the main buy and sell swings, but it did not catch some of the smaller swings.  The reason for this is simple.  As long as the TSI remains above ZERO, price is generally rising.  Small price dips within this context are usually not significant enough to cause the indicator to fall below ZERO and trigger a sell signal.  And the reverse is true when the TSI is below ZERO.
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The last thing I would like you to notice are the two bull flags that I have identified.  In the first case price movement was enough to drive the TSI down to the ZERO line.  This is actually very very common (for some reason that I have not yet figured out).  Once the TSI reached the ZERO line it bounced right back up and another rally followed. 
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A second instance of a bull flag is suggested by our price action of the preceding two days.  It would not surprise me if this flag is developed a little further early in the week, the TSI reaches ZERO, bounces, and then a new rally takes us to new highs.
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So there you have it.....and I think things look real good going forward.

If you'd like some help making more sense of the True Strength Index (TSI) indicator, send me your question or a chart with your thoughts and I'll do my best to get it working for you.

John
tsiTrader@gmail.com

Gold and US Dollar Seasonality

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As there are just three trading days left in the month of March, I thought it would be interesting to do a little sleuthing around the Internet to see what I could find out about the seasonality of gold and the US Dollar in the months of April and May.
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I continue to believe the US Dollar will fall next month and that gold will begin the parabolic conclusion of its ongoing C wave.  But does my belief collide with the known seasonal tendencies of gold and the dollar or, by chance, is my belief coincidentally in perfect alignment?  Read on because I think I have found the answer.
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Let's begin with gold. This chart is a collage of 4 different sources that offered their rendition of golds seasonality. I have drawn a red rectangle about the April/May time frame on each chart.
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The data suggests to me that the month of March is consistently a dud month for gold.  And, April / May are usually quite strong.
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Hummmm.... I'll take that as a positive.

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So what about the US Dollar?
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Well here is a chart illustrating a couple of renditions of the US Dollar seasonality.
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Well I'll be darned.  I honestly did not expect to discover that the US Dollar has a very strong seasonal tendency to fall off a cliff during the months of April and May. 
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I'm going to take that as a positive, too - as far as the immediate continuation of the gold bull is concerned.
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Well, there is my answer.  The seasonality for gold is very favorable in the months of April and May and the US Dollar seasonality strongly suggests the buck will continue to fall, and perhaps sharply.
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And just three more trading days to April.  I can hardly wait!
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4 Hour Shakeout is Over (?)

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This is a premarket view of the gold, silver and US Dollar landscape for today, Fri. March 25 through the lens of the True Strength Index (TSI) indicator.
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Click on any chart to ENLARGE
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Is yesterday's 4 hour shakeout of the precious metals over?  Well, not sure, but it is looking very possible at this point.  Here are the continuous contract hourly charts of gold, silver and the US Dollar.  This question could be answered affirmatively in the next few hours.

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The HUI mining index screamed higher for 6 days until it tested its upper resistance trend line yesterday and was met with a predictable bought of profit taking.  Maybe we need today to just catch our breath before the big breakout occurs. 

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In any event, it appears to me that gold and silver are chomping at the bits to get the show on the road.  Today may be the last day to take a position before the rocket launch.

Update: Gold's Daily Cycle -- Today's Trades

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This is a daily chart of the continuous contract of gold (/GC).  I have identified the first day of the previous daily cycle (Day 1) and the top of that cycle (Day 25).  Also, the current daily cycle began last week and today was just Day 6.
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Click on the chart to ENLARGE
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We should expect gold and silver to continue much higher after today as both are still very early in the daily cycle.  Nothing goes straight up forever, of course, but you should notice that the previous daily cycle was, well how else can I characterize it but to observe it was remarkably straight up!
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Soon we will be entering the parabolic phase of this C wave and price will begin to make larger and larger leaps upward.  You won't want to miss that so prepare accordingly.
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Today I was pleased to unwind two positions in gold miners and begin a new position in a silver miner.

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This first daily chart is of my sale of Keegan Resources Inc (KGN) at the breakeven price of $9.05.  Honestly, I have no idea why the price has been skyrocketing for the past 5 days.  It sure looks overbought to me.  Anyway, I bought KGN nearly 3 months ago and I waited through the entire intermediate correction, under water the entire time, for the bull to bring the price to me so I could sell at breakeven. Today the bull did his job and I did mine (to sell).

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This is a daily chart of my other sale today, Jaguar Mining Inc (JAG) at $5.61.  Same story, second verse.  I had acquired two positions in JAG - one at $7.15, the other at $5.61. Today's sale cleared out both positions.  One took a 21.5% loss, the other was at breakeven.
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In exchange for unloading these gold related positions I purchased a silver miner.  This is a daily chart of Great Panther Silver (GPL) which I purchased for $4.53.  The chart has a compelling trend line break on both the True Strength Index (TSI) and Money Flow Index (MFI) indicator.  It appears GPL is just getting started.
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At present I am carrying 13 positions (counting call options on SLW, SIL and CDE), 6 of which are now silver related.  I will continue to work toward rebalancing my positions in the silver direction.

My TSI Trading record has been updated.

Sold SFEG - $1.04

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This is the daily chart of Santa Fe Gold Corp (SFEG) which I sold today at $1.04 for a respectable 9.5% gain.  I had to hold the stock for 5 weeks, but sometimes that happens. 
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Click on the chart to ENLARGE
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I've reviewed the 18 stocks that I have suggested on the Tomorrow's Trades (Today!) page and I confidently believe each and every one will hit their target sell price and be a profitable trade - except for PLG.  The reason this one concerns me is that it is platinum related and I am just not so sure that platinum, and palladium for that matter, are going to get in gear like I had hoped. 
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I have been buying some positions on the silver side of the street as I am slowly selling off gold related positions.  These trades don't show up on my TSI Trading record because they are all call options and I don't know how to account for those due to their leverage.  In any event, I own call options on CDE, SIL and SLW, fwiw.
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My TSI Trading record has been updated.  The cummulative total of my trades since beginning this blog 9 months ago is now +640.2%

Sold PAL - $6.18 & Tomorrow's Trades (Today!)

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I decided to throw in the towel on North American Palladium (PAL) today and sold my shares for $6.18.  I dislike selling a miner at a loss, but it appears that the palladium metal is going to get taken down with the stock market as time goes on.  Both have made lower highs and lower lows and, well, that's just plain bear market fodder.  No sense in fighting it, so I sold.
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Click on the chart to ENLARGE
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The great news, however, is that gold has strongly broken above the bull flag on its daily chart and silver has moved itself right up against the slightly downtrending slope created by the high of two weeks ago. The HUI mining index also powered higher today.  This must be the beginning of the final leg of the C wave.
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I posted a couple of stocks to the Tomorrow's Trades (Today!) page for tomorrows (Tuesday) trade. And here is a peak at each.

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First is Aurizon Mines Ltd. (AZK).  The chart sports a fresh trend line break of both the True Strength Index (TSI) and the Money Flow Index (MFI) indicators.  The estimated earnings projections for 2011E and 2012E are the latest information from Kitco's Matlack report.

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And second is Banro Corporation (BAA).  The TSI and MFI setup is decent.  What I find more compelling however is the successful testing and bounce off support at the 200 dma and the fact that this stock has been incredibly oversold.  As of today's close, BAA is still nearly 32% below its high of March 7 just two weeks ago. In my opinion BAA is unlikely to remain this mispriced for long.
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My TSI Trading record has been updated.

15 Miners That Should Come Screaming Right Back

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Gold topped a couple weeks ago, on March 7 to be specific, and closed this past week just 2.1% below the all time high reached on that day.
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Silver also topped on March 7th and closed this week just 4.8% below the historic intraday high reached at 36.75 on March 7.
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That gold and silver have consolidated within literally a few percentage points of their all time highs, given the news events of the past two weeks, speaks volumes as to their relative strength and ability to withstand tremendous selling pressure.  When the selling pressures of forced liquidations, margin calls and downright emotional panic lift in the very near future, I have no doubt that gold and silver will break out and quickly make new all time highs.
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But what about the gold and silver miners?  Are they, too, within just a few percentage points of their March 7 high? 
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The answer is that a few are.....very few, in fact.  And within this fact lies a wonderful opportunity for an investor to get positioned ahead of the crowd before gold and silver break to new highs.
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The purpose of this post is simple.  I would like to identify for you 15 quality mining stocks that are presently on sale.  They are on sale because the market panicked in the face of one disaster after another.  They are not on sale because they have some terrible bad news (that I am aware of, anyway).  Rather, they are on sale because investors temporarily blinked - lost their heads - took their eye off the ball, and so on. 
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And I do not believe these miners will be available at these sales prices much longer. Recent selling pressure will subside, and when investors begin to think about which companies will have great future earnings in the current environment, these stocks will be right back up to their normal price of two weeks ago and then go much higher after that.
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In making this list I simply noted the highest price the stock reached on March 7, the day gold and silver peaked, and using the closing price of this past week I calculated the percentage each stock would have to rally just to reach their March 7 high.
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As I believe that gold and silver are about to move much higher, I presume these stocks will all regain their March 7th high.  As you will see, they are on sale - and some at steep discounts.
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Finally, I encourage you to use this list as a starting point for your own research towards deciding how you will participate in the upward movement I believe is on the way. I wish for your success!
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Gold - discount from March 7 = 2.1%
Silver - discount from March 7 = 4.8%
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1.  SIL - discount from March 7 = 14.2%
2.  RIC - discount from March 7 = 14.5%
3.  SLW - discount from March 7 = 16.2%
4.  AXU - discount from March 7 = 19.4%
5.  SVM - discount from March 7 = 19.5%
6.  VGZ - discount from March 7 = 20.1%
7.  XPL - discount from March 7 = 20.6%
8.  PZG - discount from March 7 = 20.9%
9.  CDY - discount from March 7 = 22.5%
10. GPL - discount from March 7 = 22.9%
11. MVG - discount from March 7 = 23.6%
12. HL - discount from March 7 = 23.7%
13. KBX - discount from March 7 = 25.3%
14. MMG - discount from March 7 = 35.5%
15. BAA - discount from March 7 = 36.8%

US Dollar - Failed Annual Cycle Confirmed

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The US Dollar is falling apart fast.  Really fast.  Two days ago it completed a failed daily cycle when it traded below 76.12.
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Now, literally within this hour, the US Dollar has already failed its yearly cycle by trading below 75.63.  The next downside target for the US Dollar would be the 3 year cycle low at 70.70. 
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Click on the chart to ENLARGE
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Can you comprehend what will happen to the price of commodities when people realize that the world's reserve currency is in a precipitous freefall?  Who will want to own the currency then? 
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Who wants to own it now, for that matter?  Something like 70% of all new government debt is being purchased by our FED - not the Japanese, or Saudis or Chinese.  We Americans are buying our own debt because no one else wants it.
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So what will people buy with dollars to get rid of them?  Why, just about anything that is tangible, for starters. Such as, you guessed it, gold and silver. I believe at some point just weeks away people will make this exchange in shear emotional panic as the waterfall they are riding is accelerating towards earth.
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For a relatively brief period of time precious metals will be seen by many as the only way to save ones self from the onslaught of hyper inflation.  And as you know, this is the dynamic that fuels a parabolic rise in price.....too many people desperately chasing a solution to an impossible problem.
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This is a great time to buy precious metals and their miners.  Today.

The Same All Over Again? Q1 2008 vs. Q2 2011

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I have been saying for some time now that our current situation is very similar to Q1 of 2008.  I'll get to that in a minute but first a quick look at the price action of the US Dollar in the last hour or so.


Click on the chart to ENLARGE

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This is a daily chart of the US Dollar continuous contract.  The current daily cycle began with a low of 76.12 which was taken out to the downside after the market closed yesterday, Wednesday.  In the mean time, this price level was assaulted just a couple hours ago and the dollar was dropped all the way to 75.85. 
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The implication for the dollar is ominous as it has become both a bearish left translated cycle topping in only 4 days, but also a failed cycle as it has taken out the previous low of 76.12 in just 8 days.  The annual cycle low established last November at 75.63 appears to be the next destination.  After that it could be quite a fall for the dollar with 71 as a possible target.
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I have made a chart, actually it is something of a collage of charts, to communicate where I think we could be headed next.  I believe that Q1 2008 was a period of time in which the same dynamics were in play as today.  The stock market was just beginning to roll over into what turned out to be a protracted and very painful bear market leg - ultimately taking the S&P from prices north of 1500 to 666.  The dollar began a series of left translated daily cycles that then took out the annual cycle low and continued south with panic intensity.  Gold, silver and their miners were at the half way point toward the completion of their C wave.  Ultimately, both gold and silver finished that C wave with a parabolic finale.
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So, here is my collage detailing the price movement of mid December 2007 to mid March 2008 in the US Dollar, S&P, HUI miner index, Gold and Silver.  It seems to me that recent projections of $1600 gold and $50 silver are still very realistically possible.
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US Dollar - Failed Daily Cycle Confirmed

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Well, that was fast.  This daily cycle for the US Dollar topped on Day 4 and just minutes ago it traded below the 76.12 level that would represent a failed daily cycle.
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And today is just Day 8.
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The implication, of course, is that the dollar is indeed going to be heading south for some time and that is just what we need to fuel the final parabolic of gold and silver.
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Click on the chart to ENLARGE

US Dollar on the Verge of Failure

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This is a weekly chart of the U.S. Dollar Index (DXYO) dating back to 2002. With horizontal lines I have identified the support breaks that lead to the conclusion of each of gold's past 5 C waves (identified with a green arrow and its date). 
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A couple of these breaks sent the dollar lower for 4 weeks, a couple sent the dollar lower for 6 weeks, and one for about 8 weeks.
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Click on the chart to ENLARGE
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Today we find the US Dollar on the precipice of another support break that I expect will propel gold to the conclusion of the current C wave.
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The dollar has been declining steadily for the past 10 weeks (since January 1) despite incredible world turmoil, the Japanese situation being the most recent.  I have no doubt the trend line currently supporting the dollar will be broken soon and the conclusion of the C wave will begin.

Subscription Offer for GoldScents

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If you are interested in knowing where the precious metals and stock market are going to be heading next, I strongly encourage you to read this weekend's brilliant report from my partner website GoldScents. It will be freely available to potential subscribers until this Monday evening. 
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To access the report, click: http://www.smartmoneytrackerpremium.com/
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Then drop down to the lower right hand corner of the page where it has the Member Login, input  Username: tsitrader  Password: gold

You will then need to log in a 2nd time.
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Then you will be able to access the March 12 Weekend Report.
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Should you wish to subscribe to access all daily and weekend reports in the future, here is the link for that: 
https://smartmoneytrackerpremium.com/?pagename=Subscribe
 
In the promotional code box, enter: goldscents15 then click continue. This will allow you to subscribe for 15 months at the 12 month subscription price. A six and one month subsciption option is also available.
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HUI - A Chart to Make You Think Twice

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On heavy profit taking days like today it is easy to forget the big picture for miners. I hope this post will at least make you think twice before you even consider throwing in the towel.
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This is a chart of the weekly Amex Gold Bugs Index (HUI) from 2002 to today's close. With horizontal lines I have identified the four major consolidations of the mining stocks since the secular bull market was born. 
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The first consolidation lasted 24 months and when the HUI mining index broke out in late July `03 it rallied to add a 60% gain to the index.
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The December `05 breakout of the second consolidation phase led to another immediate 60% gain.
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The third consolidation was truncated at only 21 months and when the HUI took off from the consolidation level once and for all in December `07, it rallied to an impressive 32% gain.
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The fourth consolidation, and our current situation, has lasted a whopping 36 months. Price flared up 13% in December `10 but has since come back down quite literally to the consolidation level - essentially making no progress whatsoever.
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It makes utterly no sense to me that a 36 month consolidation would amount to a quick 13% pop that is quickly taken away.  That is not how secular bull markets work, for one thing.
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Much more likely is that we get at least a 30% rally, taking the HUI from its current price to around 700.  And due to the size of the consolidation, it is even more likely we get a 60% rally that takes the HUI just north of 850.

Gold and Silver Parabolics - Part II

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As you will discover from the charts and information in this article, the previous three gold and silver parabolics (2004, 2006 and 2008) had a common characteristic.  Each exhibited a midpoint consolidation - a resting place that separated the character of the first half and second half of the parabolic move.  This observation is particularly relevant at this time, as both gold and silver have presently completed this midpoint consolidation and are already on their way to concluding the 2011 parabolic.
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Let's begin with the previous parabolics in gold and silver and work our way towards the current situation.  At the conclusion I will show you what I think is likely to power the 2011 parabolics to completion.

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The gold 2004 parabolic had a midpoint consolidation around and below the $387 price area.  Once price cleared this area, the second half of the move was both decisive and relentless.
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Click on any chart to ENLARGE

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The silver 2004 parabolic consolidated at and below the $6.62 price level.  As with the 2004 gold parabolic, once price cleared the consolidation area it continued higher powerfully and without hesitation.

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The 2006 gold parabolic consolidated at and below the 577 price area.  Once price cleared this range it headed north and without wavering or hesitation.

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The 2006 silver parabolic spent quite a number of weeks back and filling before reaching its half way point just below $11.00.  But once the first leg was concluded price movement was nearly vertical and extremely swift.

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The 2008 gold parabolic featured a pennant pattern that divided the entire move into two equal segments, and formed just under the $836 price area.  Price in the upper half of the move needed to slow itself down a couple times (red candles) to keep in essentially identical slope with the lower leg of the move.

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The 2008 silver parabolic exhibited a bull flag at about the 1/3 mark, then spent a few weeks consolidating half way up the entire move, around $16.30.  As we have observed to be typical, the upper half of the parabolic move, once it left the midpoint consolidation area, was swift, decisive and powerful.







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This now brings us to our current 2011 gold and silver parabolic.  I am switching software at this point from charts by StockCharts to FreeStockCharts, the reason being that the latter allows me to adjust the price height of anticipated future price movement. 

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So here is our present situation with gold.  It appears to me that the midpoint price consolidation area has occurred beneath the $1425 price level.  Gold appears ready to rocket launch into the upper half of its parabolic move.  Price is projected to the $1700 area.
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This current week appears as a red candle breather, similar to the price action of the preceding intermediate cycle.  The True Strength Index (TSI) momentum indicator is rising above ZERO and I expect it will continue to rise.

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Silver is a step ahead of gold in that it has already broken above its midpoint consolidation price area of $32, and is presently trading near $36.  The weekly TSI indicator has yielded a bullish trend line break buy signal and I expect silver to continue higher week after week, as it has in the 2nd half of each previous parabolic move. Using the midpoint consolidation concept, price is projected some 40% higher than today price to around $48.

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Finally, here is a weekly chart of PowerShares DB US Dollar Index Bullish Fund (UUP) which I am using as a proxy for the chart of the US Dollar.
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We can see that the US Dollar is literally on the precipice of a waterfall decline below key support at 22.  This roughly translates into 76 on the US Dollar Index.
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The TSI momentum indicator is below ZERO and falling.  This is bad news for the US Dollar and I view it highly unlikely it will be able to rebound, let alone hold this level.  Once the US Dollar begins to fall below support it will trigger both panic and a flight to gold and silver. And I believe this will power the concluding leg of the 2011 gold and silver parabolics.
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Sold HMY $12.30 - Buy AGQ $210.00

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This is my sale of Harmony Gold Mining Co (HMY) for $12.30. My trading software said my cost was $12.30 but now that I look at it, my Trading Record says I bought this on January 3rd for $12.58 - so I'll go with that and recognize a 2.3% loss on the transactions.
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Click on any chart to ENLARGE

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As I am eager to start inching my portfolio over to the silver side of things, and away from gold, I used the funds cleared from the sale of HMY to buy Proshares Ultra Silver (AGQ) at $210.00.
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My TSI Trading Record has been updated.

As Silver Continues to Soar, This Miner Is Just Beginning Its Monumental Move

By John Townsend, The TSI Trader

Coeur D’alene Mines Corp (CDE:NYSE $34.70) is just beginning its monumental move. I believe we may see its share price double in the next 8 – 12 weeks.

This article will provide you with an update of silver’s current parabolic move; detail the underpinnings of Coeur D’alene’s incredibly strong fundamentals going forward into 2011, and expose the powerfully bullish technical outlook for its stock.


Click on the chart to ENLARGE



Silver is presently making its fifth parabolic appearance of this secular bull market for precious metals. Our first chart is a weekly look at the World Silver Index (XSLV) dating back to 2004 and including the three previous silver parabolic moves of 2004, 2006 and 2008. The 40 week moving average is shown as a proxy for the 200 day moving average.

One of the metrics to observe is the degree to which a silver parabolic ultimately rises above its underlying 200 dma. Another consideration is the length of consolidation time that precedes the parabolic move. When I combine these two metric considerations and apply them to our current silver parabolic, it is apparent that silver’s price rise above its 200 dma could match or exceed 65%. This projects a silver peak in excess of $50. In fact, as the consolidation preceding our current parabolic has been massive, $50, in retrospect, may turn out to have been too conservative.

 This second weekly chart of XSLV considers our current parabolic using a different metric – the midpoint consolidation. There is a tendency for parabolic moves to exhibit a resting point that divides the move into two equal legs. And we observe that silver has now cleared its consolidation phase at the $32 level and is headed towards a completion of this pattern at $48.



Click on the chart to ENLARGE



The takeaway from these observations is not to argue just how high silver will soar, but to simply note that silver is going much higher, quickly and now.


Coeur D’alene (CDE) is poised fundamentally to skyrocket right along with silver. The company has three mines that are now in full production and the 2010 Q4 results announced last week revealed that analysts were significantly underestimating the company’s new earnings power. Analysts expected the company to earn 33 cents per share and instead the company reported quarterly earnings of 56 cents per share.



Some highlights of Coeur D’alene’s key fundamental data include: $3 Billion market capitalization, shares outstanding 89 Million and holding flat, selling at 1.5X book value, 2011E Price to Earnings ratio of 12 (which is about half the average PE of other large silver miners), and 2011E Price to Cash Flow ratio of 7 (also about half the average of comparables).


Consensus estimated earnings for 2011 are $2.28 per share vs. 2010 $0.39 actual earnings per share. Cash flow from operations (chart below from the Coeur D’alene website) is expected to more than double in 2011 from 2010.


Click on the chart to ENLARGE



Debt levels are trending downward quarter after quarter while cash levels are trending strongly upwards. For 2011 the company projects that capital expenditures will decline, while production of both silver and gold will increase, as will sales.


Regarding the issue of hedging the CEO, Dennis Wheeler, commented during last week’s conference call, “I just want to make it clear that Coeur has the policy of non-hedging in silver production. We know that our investors like you are believers in the continued price appreciation of silver and gold and we want our investors to be able to maximize their investment and leverage to the metal so we will not be hedging any of our silver”.

 To summarize current and projected CDE fundamentals, it is somewhat difficult for me to imagine a more ideal setup. Projected earnings and cash flow growth are explosive, current market valuations in terms of book value, price to earnings and price to cash flow are in the silly cheap category, and last quarter’s performance puts the sting to any who may have doubted Coeur D’alene’s ability to deliver. I should add that ownership of CDE shares is literally a list of the ‘who’s who’ of investment heavyweights – ETFs GDX and GDXJ, as well as Van Eck, Dimensional, Vanguard, State Street, JP Morgan Chase and Blackrock.


The following weekly chart of CDE reveals that several months ago stock price broke above a 5 year long down trend resistance line, has since consolidated above this line after a successful retest, and is now continuing higher.


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The chart also details the significance of the $28 price level which was a support level for CDE price from 2004-2008 and has since 2008 been a resistance level. Until last week that is, when CDE took on that $28.00 price level and blasted right through it, closing the week at $34.70. Technically speaking, this is the recipe for beginning a monumental move.

The 2004 and 2006 silver parabolic moves took CDE from being a $28 stock to the $75 neighborhood and quickly. As I believe the current silver parabolic is likely to surpass the magnitude of each of the four preceding silver parabolics, the fundamental underpinnings of the CDE stock are nothing short of both impressive and ideal, and the technical setup is exactly as one would hope, I consider it a realistic possibility that CDE could again achieve a $75 price target before the current silver parabolic expires.

 One final thought with a chart. The overhead resistance (selling pressure) should be reasonably mild as CDE has not traded any shares above $28 for three years or so. Not all, of course, but most sellers of the shares now are sitting with a profit and are not particularly motivated to sell provided price continues higher. And for that matter, this chart shows us that shareholders who bought 4 and 5 years ago are not holding a lot of shares anyway.



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Disclosure: I own CDE and look forward to participating with CDE throughout the concluding leg of this silver parabolic.

 I wish you a great week of trading and invite you to peruse my website, The TSI Trader, where you will find a focus on both the techniques of using the True Strength Index (TSI) indicator for accurate trading signals and the secular bull market for precious metals.



John Townsend

tsiTrader@gmail.com

Gold: A Very Good Question

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Overnight gold made a new all time high, reaching $1,444.70.  Which now begs a very good question.  Did the daily cycle really top on Day 22 and bottom the following day, OR, is gold making a stretched daily cycle and still working on making a top (today is Day 25)?
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If Day 22 was the top, gold would appear to be entering a runaway move.  If today or some day soon gold tops then we should expect it to decline to make a daily cycle bottom.
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The answer?  Your guess is as good as mine.
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In either case, it is upwards we go - continuing today or in a few days.
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My page Tomorrow's Trades (Today!) has been updated for today's trading session.