Thursday, August 15, 2013

Claude Resources (CGR) - 10 Bagger on the Way(?)

This brief post is for those unfortunate souls who followed me right into the Claude Resources (CGR) muck and have persevered the nightmare of holding a huge draw-down for quite a long period of time. I commend you for your courage, your faith in the gold bull market and your ability to be the very quality required this time around, which of course, is the quality known as patience.

I made a simple chart of CGR to share with you. On the left side of the chart is the daily price action, and on the right side is the weekly.

The earnings and estimated earnings on both charts are from 2009 forward, and are current. 

Here is the chart:

The company recently announced their earnings for Q2 and you can read the transcript of the conference call (I have) if interested. I didn't receive any lightening bolts of inspiration from the discussion, but that's OK. The company is cutting way back on expenditures, targeting the mining locations with the higher grades of gold ore, and basically making what appear to be reasonable decisions that will help them weather the storm.

Probably the one tidbit of some interest to me was the discussion about taking a $10 million hit this quarter. They decided that as gold valuation has sharply declined recently, the valuation of the gold in their mines has declined so they recognized this by declaring an adjustment (loss) to their tangible book value. 

OK. I guess that makes sense. So now their tangible book value, I read, is $1.00 per share. But as the stock sells for only 23 cents per share, I guess that means their stock sells for 23% of tangible book value. (I could have been a math teacher, right?)

But getting back to the chart above, and my comment about the potential for CGR to become a 10 bagger in the not so distant future, you may recall an article I wrote about my trading experiences during the 2008 'similar hell'. And whether you recall the article or not, my reminder relevant to now is that the stock I owned did finally bottom at literally 2.5 cents, and within hardly more than 2 years thereafter, the stock soared what amounted to 2766%. 

These things happen. And when the mining sector is taken down, it is taken way down. But the gold bull, by any measure I am aware of, is alive and well. In fact, I really think Fibonacci nailed the exact bottom in late June and 'we ain't' going there again. 

So fellow martyrs, we have a True Strength Index indicator (TSI) trend line break on both charts - one using the slower and trend following TSI (25,13) and the other using the speedy TSI (7,4).

We also have a positive divergence BUY signal on both charts. About the only BUY signal missing for the full tamale meal is the ZERO crossover. With readings of just -0.05 and -0.18 we are just about there.

Smile - you deserve it!



  1. Monthly chart 3dma about to cross over the 5dma, just as it did in early 2009. It went up from 0.19 to 2.91 in 26 months.

  2. Hello John, I think the game has begun. Look at NUGT going over the roof from past 2 days. I think lot of short covering has started as you predicted. I am not sure if this is the right to time to jump in NUGT or not ? any advise ?

    thanks a lot for your insights and work.

  3. Anon - the game began in late June, as Fibonacci told us.

    NUGT - depends what your time frame is. If you are trying to be cute and time the market price for a few days, that's one thing. If you are believing in the gold bull for the long haul (as I am) that is another thing.

    What you are seeing right now is what usually happens early in gold's daily cycle. Today is day 6 and assuming we top right of center - say about day 12 or thereafter - we will see higher gold price (than today) in the next week, at the least. If you are a timer guy then you missed the best chance to be really cute several days ago after it was clear the new daily cycle had begun.

    If you plan to buy and hold, no matter what from day to day, you might as well buy, hold your nose on the chance you get pushed under water for a short spell, and fasten your seat belt.

    I have not talked about this for a while, but I have always believed that the market forces pushing gold down - drowning it's head in the toilet - would be reversing their position to long and joining the faithful for the huge ride north. Obviously that works best for them when everybody is selling and scared out of their pants as they can buy from the panic stricken sellers and get their position reversed. I think process is long since over.

    Now what you are seeing are the dummies who did not get off the frying pan soon enough.

    It's your money. Be sure you have it clear in your mind what you are trying to do and how you will handle it if it does not go according to plan, OK?

  4. thanks John for your honest opinion. I am planning to take a plunge for longer term. I had held IAG for quite some time and still holding it... but i burnt my hand with NUGT last time and was hoping to recover some money with a short trade

  5. John -

    Because of your interest in the stock, I have followed CGR for some time. For some bizarre reason that I can't begin to give you, I jumped in back on July 17 when the price hit the low of just over $0.20. It "felt" right, even though I really had no good technical reason for it. If this was like many of my trades, it should have gone lower.

    Needless to say, I am a pretty happy camper with a return today of over 25% already. If this thing goes as you suspect, I will have to say that it was the best trade I ever made.

    Here's to hoping!

    Thanks for a great blog and all the really cool analysis you do!


  6. Phil - well, you have done better than I with this CGR trade - by a long shot. And you are correct in thinking that the trade is long from over. If by some chance you do not have the same resolve as I, who knows, I may have the last grin. But that really does not matter to me whatsoever as I compete with myself and no one else.

    I am very happy for your and thank you for writing! I am flat out of play money and will not buy more now, though I know damned well that is the correct thing to do. See you at the very top? (I hope)

  7. John -

    I hope you do get the last grin . . .

    You deserve it!



  8. 10 bagger for those who ignored John until now, and certainly not a 10 bagger for John who may double his investment in 2 years--still not bad.

  9. Anon - fwiw, my computer tells me my cost per share is .5873227.
    If CGR returns to test its high of March 1, 2011 at $2.91 I guess
    I have the potential for a 500% gain.....and that assumes that gold
    does not do better than retest its all time high of $1923.7. As I
    have never doubted that gold was going to do much much much more
    than just retest $1923.7, should that happen I don't see why CGR
    would not be $5-6 and a 10 bagger for me, after all. :-)