Tuesday, April 2, 2013

Claude Resources (CGR) and Gold's Parabola+


I've got to admit that I'm really liking what I am seeing now as gold is in free fall and trading just above $1563. It's been fully 15 months since gold's last annual cycle low (long overdue) and the price action now promises to bring the 2013 annual cycle low in a matter of days, if that. Additionally, gold's weekly cycle is on week 20 and that is due to bottom (average is 20-24 weeks). And the daily cycle is running long and on day 28 (average 24 days). 

It doesn't get much better than this. The rallies out of annual cycle bottoms are worth the price of admission to the beholder, even better if one is LONG for the ride.

But what a wait it has been to get to this day! So, so true.

Anyway, this post will take a quick look at Claude Resources Inc (CGR) which very recently posted its 2012 results and provided a substantial amount of very favorable information in their conference call last Thursday March 28, 2013. 

You can read the entire transcript at: 
http://seekingalpha.com/article/1307741-claude-resources-ceo-discusses-q4-2012-results-earnings-call-transcript?source=yahoo

Following our fascinating look at a couple of CGR charts, we'll look at a monthly chart of gold futures and cast a new spot light on the math of a parabola as it takes shape and prepares for hitting the stars.

This first chart comes from Claude Resources' website: 
www.ClaudeResources.com


Click on any chart to ENLARGE

The conference call transcript provides a good amount of color and makes the information on this chart easier to grasp. But the short of it is this: management is confident that the annual ounces of gold production will increase from something in the neighborhood of 45,000 in 2012 to nearly 100,000 within the next 5 years (2017). AND, the cost to produce each ounce is expected to fall from $1,000 to $800.

I kinda think a company that can double its mining output and cut costs of production at the same time might make some money, no?

Of course, I do encourage you to research before buying this or any stock with the conviction of your hard-earned dollars. The links above will give you a solid starting point on Claude Resources Inc. (CGR), should you be interested. Also, I have written about this stock recently.

So what does the weekly stock chart of CGR look like now? 

Well, it looks insanely stupid cheap considering the earnings (past and projected),  and considering the stock price per share in relation to the tangible book value of each share (selling at 37% of book value). 

But some other technical details on this weekly chart find me smiling from ear to ear.



This is (finally) a great setup. Some sharp movement lower and then a reversal will catapult this thing like a kid on a trampoline. The TSI (7,4) is nearly up to ZERO, yet price is pennies from a new low. Circled in light blue is the perfect setup for a powerful positive divergence BUY signal. Should price trade intraday to or below $0.38, that would make the signal official.

But, there's more! The green TSI trend line shows that once the purple TSI indicator crosses up through it, the trend line break BUY signal will be activated. And thirdly, at -0.21, the TSI is not going to need much help to give a ZERO crossover BUY signal once price starts to pop. This signal is given once the indicator transitions from negative to positive readings.

I love these 'the gun's loaded' setups because when you get three TSI BUY signals quite literally at once, well, the odds for success are very very good. 

Yes, this is a weekly chart and yes, all three BUY signals may not be fully triggered for a week or two...but you get my point, I'm sure. Unless you are a dare-devil (like me) you would be prudent to wait for at least two of these BUY signals to become active before jumping in, if so inclined.

For nearly two weeks now I have had a limit order to buy CGR at just below $0.40. With a little luck I may get what I will consider, until proven otherwise, the best deal of any trade I've ever done. 

And finally, let's take a look at gold's monthly chart from 2000 to the present and let the computer do a little calculating for us.



I drew a straight line (blue) connecting the slope of the monthly candles beginning around February 2001 to a point where it seemed that price took on a new and steeper slope. I repeated the process (magenta) which took me to the 2008 8-year cycle low. Then I completed the exercise (cyan) to bring us to this month's candle.

One expects a parabola to continue to rise at ever steeper angles. So, for the fun of it, I used some computer code (ThinkScript) to calculate the angle of the three differently colored slopes. And to no surprise, gold's parabola is indeed behaving (mathematically) just like a parabola is supposed to behave. Initially rising at 72.6 degrees, the second phase was rising above horizontal at 81.5 degrees and the third phase was steeper yet at 86.4 degrees.

Price can be charted with and without the use of log scale and that will make the slope of price 'look' different. Even I am shaking my head at the notion that gold's third leg is rising at 86+ degrees. But if I were to have compressed the candles instead of shown them lolly-dollying across the screen, I could have made the price trajectory 'look' like 86+ degrees. Anyway, I have always enjoyed math because it gives you an answer that is definite and true....so, I guess it's 86 degrees for now and the next leg will be even steeper as we await the 90 degree vertical conclusion in years to come.

Well, I hope you are enjoying this conclusion to the boring waiting as much as I am. I can't wait to see what tomorrow will bring!

Keep in touch,

John
tsiTrader@gmail.com


36 comments:

  1. Great post. Much needed to the Gold camp who have seen no joy for so long.

    ReplyDelete
  2. Thanks for the post, John. We've got multiple BBC trades on across the commodities space, specifically in silver, silver miners, and in GDX. Anyone picking up CGR, IAG, or the regular ETFs GDX, GDXJ, and GLDX are going to have a good summer as the $SPX stagnates.

    The DXY has risen 5% in seven weeks and is severely overbought. Last week's COTs showed that the loonie and aussie are poised to run, and that should help your trade, too.

    When they're all full of doom, and on one rail on that skiff, we tack with the wind.

    ReplyDelete
  3. "I've got to admit that I'm really liking what I am seeing now as gold is in free fall"

    are you short metal John? I thought you were holding PM stocks in your retirement portfolio? Are you really liking decreasing value of your retirement portfolio?


    confused...

    ReplyDelete
  4. Anon - ah heck, please don't be confused. I am not short metal. I am holding
    PM stocks in my tsiTrader and retirement accounts. And I am not really liking
    decreasing value in my accounts, but I am not concerned either.

    What I meant by your quote was that I am liking to see that we should be heading
    for a well-timed capitulation. So, that potentially means some scary lower price
    in PM and miners, but it most definitely means this is the end of the line for the
    bears.

    So yes, I am liking seeing the end in clear sight.

    ReplyDelete
  5. Hi John,

    I can always count on you to put a smile on my face while I'm puking.

    ReplyDelete
  6. John,

    I am not sure i understand your logic. Hoping and wishing does not get people far in the investment world.

    Every gold bug hopes and wishes for a recovery right now.

    ReplyDelete
  7. Wow - gold reached $1555.2 which just barely does the trick to qualify
    potentially as the annual cycle low, as the previous low of February 21
    was $1555.3 Very kewl! Gold now has a positive divergence TSI (7,4) BUY
    signal on its weekly chart with a picket fence TSI trend line descending
    and ready to be violated. The shorts need to hold price under $1555 so
    they can hit stops and flip their high volume trade.

    The logic is simple. These annual cycles do not conclude with hoping and
    wishing for a better day in the investment world. They conclude with violence.
    One side literally punishes the other side. It is a financial rape of sorts.
    Extremely scary, emotional. One side rips off the other side and leaves them
    for dead along the side of the road. Then, it is over.

    ReplyDelete
  8. Dear John,

    If (a big if) gold does not hold at 1540 - 1550ish and break the support, then there opens a bottomless pit to 1300 gold. No one can say that this will not happen! Are you prepared for this? For one, I cenrtainly do not hope to see this happen, but who knows?
    Care to comment?

    ReplyDelete
  9. Anon - perhaps you have forgotten about the 1520ish support zone? I don't see
    a bottomless pit to $1300, fwiw. This is emotional scared rabbit retail selling
    while the sharks are enjoying their meal. To show you a bit of the irrationality,
    the US Dollar is down strongly for the day, the TSI has given a ZERO crossover
    SELL signal and sports a current reading of -4. The weekly TSI for DX has a noticeable
    negative divergence SELL signal and Money Flow Index indicator is hitting its head
    on the ceiling. With the dollar looking so weak what explains gold's down days?
    Do you think it is Central Bank selling from China or India or Russia? ha ha
    Or maybe the world really can deflate their currencies, have all their outrageous
    debts payed off, and truly get something for absolutely nothing? I'd say that is
    as likely as the fairy tale about the Emperor who wore no clothes, yet tried to
    convince everyone that he was indeed wearing clothes.

    Absolutely I am prepared for this. I know gold's consolidation will not last longer
    than I am prepared to sit and twiddle my thumbs.

    ReplyDelete
  10. We traded to 1549 and change. Does that make for a potential intermediary and yearly cycle low, John?

    Please explain what you mean by "a picket fence TSI trend line descending and ready to be violated," OK? TIA.

    ReplyDelete
  11. Hi: john

    Please give a advice for SLW near term.

    Thanks
    Norman Tam

    ReplyDelete
  12. Hi Norman - very nice to hear from you!

    But oh my ...... what a tough question. I can't offer an advice but I can tell
    you what I see and leave it to your better judgement to go from there.

    First off, as I personally believe this is finally the end of the line for
    this intermediate cycle of gold (which implies a major bottom for both gold and
    silver), and as as SLW is a first rate play on silver miners, I would think
    SLW does not go much, if any lower.

    On March 21 SLW announced Q4 and 2012 annual results and they were outstanding.
    (http://www.newswire.ca/en/story/1133895/silver-wheaton-reports-record-2012-operating-and-financial-results)

    Additionally, the dividend payed for Q4 ($0.14) appears to be significantly higher
    than in any previous quarter.

    The fundamentals, without digging any deeper, look excellent. I am also impressed with
    the relative strength of the share price over the past 3 full years. It, like gold, is
    making a long consolidation that is measured in time as opposed to price.

    The weekly TSI (7,4) has yielded a positive divergence BUY signal just this week. But
    honestly, I would not make too much of that. Money Flow on the daily chart is holding
    up surprisingly well considering the price movement of the past 3 days. But again, I
    would not make too much of it.

    Norman, it's difficult for me to get real excited by what I see as a short term trade.
    If you already own it I think your downside from here is minimal. ON the up side, it may
    take a few fits and starts before the momentum becomes decisively bullish.

    I hope I helped you a little my friend! Please keep me posted, OK?

    ReplyDelete
  13. Thanks John
    it helps me a lot to make a trade in near term,

    Thanks again happy trading.

    Best regards
    Norman Tam

    ReplyDelete
  14. Heads Up - sure thing on gold's annual cycle low being a viable right here
    right now done deal. The intraday low today satisfied the price requirement.

    Gold's TSI (7,4) 'picket' trend line on the weekly chart is easily seen by
    connecting the TSI highs of the weeks Nov. 19, Feb. 4 and Mar. 25. This
    particular TSI pattern has always reminded me of the cliche white picket
    fence because of the way it looks.

    Another example of this pattern can be seen on gold's weekly TSI (7,4) in
    the late 2010 time frame. Connect the highs of Nov. 1, Nov. 29 and Dec. 27.
    I would consider this specimen more bullish than our current specimen for
    the simple fact that it was formed ABOVE ZERO. This strengthened the odds
    that an upside break out of the TSI trend line would be *very successful*.
    And as anecdotal evidence of this truth, following this trend line break
    BUY signal the week of Feb. 14, 2011, gold romped from $1392 to $1923
    in just over 6 months.

    ReplyDelete
  15. hello John,

    You are saying that gold's annual cycle low is a done deal. However, we never really know the end until the market confirms it. People have been calling for the bottom for many weeks now and still gold keeps going down.

    I agree that miners do look very cheap. You have posted very well written and researched articles about a few mining companies and HUI to support your outlook.

    Now here is a wrench...First please excuse me John because as far as I know, you don't often read many articles and prefer to do you own research and analysis. I admire your intelligence, resourcefulness and independent thinking. As I can see in your trading record, you have done well.

    Anyway - if you are so incline - please simple read the extracted portion of an article. It is something Dan Norcini just posted on his site. I have a lot of respect for him so I think it might be worthwhile to you.

    Here is what he said about Gold and Miners:

    ***As far as gold goes, it either holds here in this support region between $1550 - $1525, or it is going to sink to $1480 for starters. With the gold stocks continuing to stink up the place, gold is losing any help whatsoever from that quarter. Central Bank buys out of Asia and elsewhere have been keeping this floor solid in the gold market so they had better not falter in those purchases or else...

    I am not even going to put up a chart of the HUI at this point as it is simply too ugly. There is a pivot region near 300 and that is more than likely where the pathetic thing is headed unless we see some spark to the gold price.

    I will leave you with a ratio chart of the HUI to Gold price. It is now closing in on the 2008 low. Keep in mind, this is AFTER FOUR ENORMOUS QUANTITATIVE EASINGS attempts. What in the world will it take for these stocks to do anything if 4 rounds of QE cannot take them higher? Makes me seriously wonder if some of the gold mining companies are going to survive to be honest.

    In the long run such a thing would bring less supply onto the world market which would be supportive for prices moving forward, not to mention allowing those healthy companies which remain to become more profitable. The problem is, how long is the long run going to take to get here......?*****

    If you care to comment, that will be terrific.

    Again Thank you John for sharing you knowledge and research and precious time with all your readers!

    Respectfully,
    A


    ReplyDelete
  16. John,
    Wishing and hoping? thats exactly what gold bugs are doing right now. They ignored technicals and are paying for it now.

    You were asked sometime ago about 1400's and you said "zero chance"!

    Here we are 50$ away.

    What will you say if dip goes down there?

    ReplyDelete
  17. A - you have written me in a very gracious tone and I do appreciate that. I also appreciate
    when someone disagrees or challenges me, that they have some facts. Something to debate.
    A point or two that will make for a good discussion, a sincere attempt to find a grain of truth
    in the midst of an often irrational market. What I have no patience for is the guy who has all
    the answers and absolutely no tamale to back up his point of view. If I happen to agree with his
    point of view (for my own reasons) then I back off. But if I happen to disagree then I want
    to hear some rationale or I quickly (and easily) say BS and bye-bye.

    Dan Norcini is a name familiar to me. He is well known within the small circle of gold analysts who stick their neck out to write about gold, etc. I have no doubt that he is infinitely more qualified to speak about the finer points of trading gold than myself. Without a doubt in my ignorant mind, he earns hundreds of thousands of dollars (as most of this genre of folks do that I am acquainted with) for making his wisdom known to others. I make absolutely ZERO. So perhaps the cliche, 'you get what you pay for', applies to this discussion in spades.

    A - I don't find his primary concern terribly in conflict with my own. I do indeed think the $1525 price area, should it come to that, will hold. His secondary concerns which include miners and QE are, to me anyway, more fluff than substance and totally irrelevant in my point of view.

    In my opinion, and that is exactly what it is - opinion, not fact - almost everyone, including your distinguished writer, is missing the forest for the trees. We are all so conditioned to think there is a reasonable explanation for everything that happens every single second of the day. And that is a good thing for the smarter people in the world because it provides an easy way for them to play the mass of sheep to their advantage.

    The point, more specifically, that has been missed is that there is ALWAYS a period of profit taking after an enormous bull run and there is ALWAYS a period of *time* to consolidate the correction and prepare for the next blast higher by the bull.

    The consolidation following gold's 2006 high included a 50% correction of the previous C-wave's price gain and 15 months of elapsed time before attaining a new all-time. The 2008 high included a 78% correction (if I remember correctly) and 18 months of consolidation before attaining a new all-time high. The 2011 high has, so far, been followed by a 38.2% correction of the preceding C-wave gain and to date is around 20 months in duration.

    OK. So Dan Norcini and anyone else with a bull horn can get excited if they want, but the fact is that the longest C-wave to date (2009 - 2011) has been followed by a consolidation period ENTIRELY within reason and still *short* when measured proportionally and comparatively with all consolidations following the C-wave tops of the past 12 years.

    Even more astounding is the fact that this consolidation has only retraced 38.2% of the previous C-wave. I have studied and written previously about these retracements in great detail. Save for 2006 (50%), all price retracements were 61.8% and greater.

    Should the current retracement follow the pattern of gold's bull to date, I would think a 50% retracement to be entirely in order. More likely 61.8%+ But that is not what has happened, at least so far. Instead, this retracement has been limited to 38.2%. At this point I seriously think the odds the retracement increasing are very very slim. The learned textbooks call this a high plateau consolidation, or something like that. The point is that the bull is so strong that it is unwilling and not needing more price correction to get rid of the weak hands. It is waiting for time to make as many people as possible unbelievers....then it will continue.

    ReplyDelete
    Replies
    1. The QE rhetoric you quoted above is, in my opinion, just hot air. Nice try to make a convincing argument but I am not persuaded. Again, at this point I think Mr. Norcini is doing his very best to make some sense of what should make logical sense, but is utterly irrelevant.

      The tonnage of printed money has not yet spoken, as he erroneously presumes it should have by now. The reason it has not spoken is that the possessors of the funds still have hope they are holding value. They have not yet figured out that the promise to make good is going to ultimately turn out to be a very very unfortunate lie. That is, those that promise repayment of debt (US Govt, for starters) are not going to be able to repay. And in retrospect I think it will be noted by historians that politicians, and including Central Bankers, were not willing to tell their constituents NO....thus they continued to incur far beyond their capacity to service it.

      Some people understand this already. Many more will understand this in the next few years. But when the general public finally understands this, God help us. That will be the final 90 degree parabolic in gold price and likely last no more than 18 months before it self-destructs.

      And his final question - "how long is the long run going to take to get here......?" is the question that separates the men from the boys. The answer, my answer A, is that the answer, in detail, does not really matter.

      Few, I guess, have the guts to hold still and KNOW the long run will get here. I have no idea how Mr. Dan Norcini feels about that. But I do indeed know for myself that however long it takes to get here is worth the wait for me.

      Delete
  18. Anon with the $50 concern -

    I could care less, quite honestly, if gold drops another $50.

    This is not some contest of words and clever rationalizations for me and I have no problem admitting I have clearly mistimed several of my BUY entries in recent months and my positions are drowning under water. Too bad. Tough luck. And so what?

    I doubt gold is going much lower. Certainly it will not go lower than I have the patience to endure, I can tell you that.

    I think many traders/investors think if their investment is under water they should concede defeat, recant everything that lead them to make the original investment decision they made, and put their tail between their legs.

    Perhaps that is the way you personally handle your affairs, I have no idea, but your trading ideas are not my concern either way.

    But just so you can step up to the microphone, would you like to tell us what you will say when/if gold is $50 lower?

    And if it's something as inane as "I told you so" I will promise you your comment will never be published. Every call has 50/50 odds and "I told you so" is worthless. Put some meat on the table if you want to eat dinner with your friends.

    ReplyDelete
    Replies
    1. John,
      The concern is not some 50$ drop. The concern is entering (already did) prolonged bear market in metal complex.

      Extreme highs, require extreme lows. 1540 and 27 are not extreme lows in my book.

      Good luck to all.

      Delete
    2. 50$ concern - go look at my trading record and see what
      I bought on May 15, 2012. Sure, sometimes we get 'lucky'
      and sometimes 'unlucky'. I understand that the market is
      not altogether rational, to say the least. Some people,
      I am sure, thought I was crazy with that purchase. Some
      people probably shook their heads and thought I had a lot
      of guts. Whatever. I still remember the morning I place
      that order and it was easy to do because I thought just
      the opposite of the market. The market was scared and I
      thought the price action took nearly all the risk out of
      the trade for me. I was 'right' and the market was 'wrong'.

      Your trade, sir, is about to turn into my May 15 trade if
      you give it just a little time.

      Delete
  19. John,
    Before I log off for the day, I want to thank you for such an extensive answer! I will have to read it again tomorrow. It has been a long tough day and I have just about had it.
    A


    ReplyDelete
  20. Hi John,

    I very much respect your writing and thank you for the information.

    I have one question regarding gold parabola - the angle of the blue line depends on two points - the start and the end points. If the top point of the blue line shifts lower (along the Y axis) - today 4/4/2013 04:44 am on the 24hgold.com website the price is not $1576 but $1544, the angle/slope decreases. So it might not be a parabola ... yet.

    Could you please comment.

    Thank you again.

    Regards

    ReplyDelete
  21. Parabola - it's a parabola. I used $1550 as my calculation price point. I have not got time at
    this moment to run some numbers, but later today
    I will for the fun of it. And I will figure out
    how LOW the price has to go for the angle of rise
    to be in a straight line with the middle line,
    then write back to you at this location. Fair enough?

    ReplyDelete
    Replies
    1. Parabola - I did some calculating and determined the
      price of (monthly) gold that would cause the second
      trend line to also become exactly the third line.
      If monthly low gold price reaches this number then
      I will agree that the argument (proof) of a parabola
      is nil.

      April 2013 $1348
      May 2013 $1367
      June 2013 $1377
      July 2013 $1396

      As of today, the April 2013 low is $1539.4

      Delete
  22. John,
    FYI - Norcini's blog is free.
    A

    ReplyDelete
  23. Thanks A!

    Here is the link to Trader Dan Norcini's website:

    http://traderdannorcini.blogspot.com/

    ReplyDelete
  24. John,
    1st, thanks for the blog and all the analysis you do and discuss. The responses (number and quality) underscore how the PM market has been shaken badly. When one also considers the "paper leverage" involved by some of the institutions rational risk assessment seems tough. Now overlay the banking, financial, currency and political atmosphere we live in. Keeping emotions out of objective analysis and trading can be tough.

    The last time PM companies prices were this low compared to the metals was during the 08-09 crash. But the general stock market has been on a bull run. How can this be reconciled?


    ReplyDelete
    Replies
    1. Can the miners be telling us that much lower PM prices are coming? Leading indicator anyone?

      Delete
  25. Rick - it's always appreciated to hear a word of appreciation from readers. So, I thank you!

    Your question is a very good one and no doubt the answer is a puzzle to most people. I knew the answer to your question, but before writing it here I checked it out with math to see just how correct I was. Turns out I am definitely very correct.

    I should write a post and show a few charts of this and maybe I will. Anyway, there is an indicator called Correlation that comes along with the ThinkorSwim platform. One can have the computer visually demonstrate the correlation between any two ticker symbols, and adjust the number of periods used for the calculation.

    So, I compared the correlation between HUI and gold and did another study looking at HUI and SPX. It really did not seem to matter which time frame I used (50 vs. 200 weeks, for example) because the correlation between miners and gold is always very positive, and the correlation between miners and the stock market is sometimes positive, sometimes negative and sometimes not correlated whatsoever.

    So in short, the answer to your excellent question is that miners follow gold much more than they follow the stock market.

    ReplyDelete
  26. Hello John, Nugt had a reverse share split. Your break even now is 76. Do you suppose ( with analysis and prognosis) that it will catch up with that price and move further up to be sold at a profit. Looking forward to your opinion. thanks in advance for your kind reply.

    ReplyDelete
  27. NUGT - WOW, $76 is quite a hike from where we are now at $22.
    That's for sure!

    Honestly, I have not payed much attention to issue of 2X and 3X
    ETFs value decay over time, but I gather it skews things and not
    in the favor of a person holding the ETF for a long term investment.

    So, absent the math and reasoning of that factor, which again, I
    concede could be significant, my answer is yes, I expect NUGT to
    surpass $76 and be sold at a profit.

    Using this stock split update, NUGT reached $218 in early September
    2011 as the previous C-wave topped. I have no doubt that gold will
    return to $1900 and so I would presume that if NUGT is not $218 at
    that time, it surely will be worth $76 and change.

    ReplyDelete
    Replies
    1. NUGT - thank you very much John for your kind advise and opinion. sincere appreciation. wish you pleasant weekend.

      Delete
  28. Gold gains more than $20, and yet, GDX ends in the red!
    How do you make sense out of this? Any explanations?

    ReplyDelete
  29. Well, here we are at $1392. and CGR at $27. Your gun seems to have misfired. I dipped a toe into CGR at $29. and of course it dropped to $27. Any change in your outlook on CGR?

    ReplyDelete