Monday, September 21, 2009

[We often feature the work of our friend and colleague Chuck Cohen, a NYC-based investment consultant who specializes in mining companies. Below, he explains why it is time for those who have been straddling the fence to buy junior gold shares.  He concludes with two specific recommendations that trade over-the-counter for less than $1.] Rick has asked me to write about gold with a focus on the junior mining companies, so here we go, along with a couple of specific recommendations. I tried to point out the pros and cons of buying the juniors last month, but let me now make a quick refresher. I also suggest that you go back to Rick's August archives to review my articles on gold and the junior sector. Advantages of juniors… -- They have been beaten down in price due to the credit squeeze last year. -- They are on very few radars screens -- certainly not on the radar of mainstream America, which is still scouring drawers and attics for loose gold jewelry to sell. -- Due to the supply/demand situation, many juniors will be bought by larger companies who need to buy ounces of reserves. Eventually, this will turn into a frenzy. -- In every mania, the smaller stocks eventually perform much better than the larger companies. -- Most importantly, the potential leverage (ounces to market cap), especially as gold really takes off, will be staggering. This is probably the single most important factor in  considering a specific company. -- Because of their leverage you don’t have to risk as much as you would with the larger companies. …and some disadvantages -- They are thinly traded, and some have wide spreads between the bid and the ask prices, so you have to be judicious once you have decided to buy one. -- Some

I posted some targets for this vehicle in the chat room the other day but missed one that could have immediate relevance: _____.  Notice in the  weekly chart how last week's high fell just 13 cents shy of the target.  That's close enough, and the target has been long enough in coming, that we should be prepared for a significant pullback -- one lasting perhaps 2 to 3 weeks. If the pullback turns out to be small stuff, however, and GDX pushes above _____, we would infer it's headed for at least _____, the 'D' target that results when you slide down to the one-off low at 17.59 recorded last November.

There are no clear targets for the correction begun from 17.690 on Thursday, so a Hidden Pivot support at 16.810 will have to suffice. A bullish reversal on the hourly chart would be signaled at 17.405.

The futures have spent two days in what looks to be a tortuous consolidation, but they don't look ready yet for another surge higher. If and when they resume their suicidal climb, there are no targets above that look like bet-the-farm shorts.  However, the two that I find most compelling, both from the weekly chart, are _____ and _____.  Pivoteers will notice that that the summer selloff was not sufficient to give us a legitimate B-C pullback, since it did not equal the required 0.618 of k-A.