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Canadian mine at pivotal point
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Despite the recent "correction"
across the gold and silver stock sector, a few speculative,
low-priced junior mines (i.e., penny stocks) have rallied
impressively on a 1-3 day basis this week. One Canadian junior
mine was up 50% on Friday in spite of the weakness across
the gold share market. This just goes to show that penny gold
mining shares can rally in spite of gold market weakness,
or conversely, can decline in spite of gold market strength.
The name of the game in trading
speculative mining shares is quick entry and exit for a 1-3
day trade. Sometimes, if the floating supply of shares isn't
too great and the chart pattern is right, a breakout in a
penny mining stock can explode and turn into a sustained rally
that surpasses even the wildest of expectations. We've seen
a foreshadowing of this back in December and early January
when we were regularly reviewing the Canadian junior mining
shares, as many of them saw great 1-3 day upside moves. This
was a propitious time to be trading in the penny mines since
the chart patterns and prices were right.
Things have cooled off quite a
bit for most penny gold shares and some are mired in supply-driven
trading ranges. Yet there remain a few attractive stocks that
still fit our basic qualifications for a potentially profitable
penny stock trade, namely:
1. Low price and relatively low
trading volume (preferably below $0.20/share, the lower the
better).
2. Strong-looking chart pattern
with little overhead supply visible. Especially bullish is
a nearby chart pivot or downtrend line that appears close
to being broken. The appearance of well-defined parabolic
bowl patterns is also something to look for.
3. A recent period of "quietness,"
or inactivity as prices coil near a potential breakout level.
This is the real clue that a potential rally is about to begin.
After surveying dozens of low-priced
mining shares in recent days we have isolated what we believe
to be another potentially profitable 1-3 day (or longer) upside
trade. This particular stock trades around $0.10/share, is
coming off a major long-term low, is being support above a
series of critical chart pivots and is near a breakout of
a 2-year downtrend line, which would be a bullish signal.
The price is right, the pattern is right, and the company
is fairly well established and has been actively traded for
at least 14 years. The company in question? Beau Pre Explorations
Ltd. (Symbol: BPD.TSXV).
What really impresses us about
BDP's long-term chart is that for the past 2-3 years prices
have been coiling in a triangular fashion, obviously in preparation
for a major breakout to test the previous highs of the last
up-cycle. BPD tends to alternative along a 4-year cycle where
the first two years are bullish and the second two years are
bearish. The final two years of the previous 4-year cycle
bottomed late in 2002 and the way appears clear for another
2-year bullish phase. Moreover, a 2-year downtrend line will
be broken once the $0.15 level is crossed, while a 6-year
downtrend line will be broken once $0.20 is overcome. This
would be a double confirmation of a new bull market phase
in BPD.
As you can see from the 3-year
chart there is a rather large and pronounced triangle pattern
with the upside breakout pivot at $0.15 and immediate support
at $0.09 (18-month uptrend line), a second support at $0.08,
and a third and final support at approximately $0.06 (3-year
uptrend line). This convergence of trendlines and trading
channel bottoms forms a strong pivot of support that was recently
tested this week and should prove to be base of support for
the next rally phase. Note also the gradual decrease in trading
volume, which is what we want to see in a bullish triangle
pattern.
Beau Pre Explorations Ltd., located
in Victoria, British Columbia, owns and operates a large number
of mineral claims with approximately 15,000 acres on southern
Vancouver Island which consists of a contiguous block of 79
claims (262 units) that covers a block of ground about 15
kilometers east-west and up to 5 Kilometers north-south. BPD
owns the claims 100%. These claims are located along 2 well
documented fault zones. The Valentine Mountain Project has
produced spectacular results from core samples, milling and
panning. The company is reported to have in excess of 14,000
ounces of recoverable gold within a 100-metre block that it
believes can be recovered profitably.
Last week the company announced
it has completed a program of trench sampling and reclamation
on its 6,900-hectare (17,050-acre) mineral claim group at
Valentine Mountain, located 19 kilometres northwest of Sooke,
B.C. Significant gold values were obtained from trench 1.
A one-meter-wide zone with a weighted average of 11.376 grams
per ton Au (0.332 ounce per short ton Au) was outlined by
the company.
Visit the company's web site at
http://www.beauprex.com
for more information. A word of warning: Like all low-priced
junior mines, this stock is highly speculative and should
be traded only by those with experience in penny stock trading.
Trade only with judicious amounts of capital that you can
afford to lose in case the trade goes against you.
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Clif Droke does not own shares, directly
or indirectly, of Beau Pre Explorations Ltd. He has not been
paid or compensated in any way by the company for writing
this commentary, nor does he expect to receive payment or
compensation.
Clif Droke is the editor of the weekly Bear
Market Report, a combined forecast and analysis of U.S. stocks
and indices and international precious metals stocks, and
is the author of numerous books on finance and investing,
including most recently "How to Trade Gold & Gold
Stocks." Visit his web site for free samples of his analysis
at www.clifdroke.com
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