DISCLAIMER: I am not a professional trader. I do technical analysis for fun. Please do your own research. Understand that by reading the following article, you agree that any trades you make are at your own risk.
I'll begin by pointing out what looks to be a nice reverse head and shoulders forming up on the $TSX:
As you can see, Canadian stocks have taken a bit of a beating on weak economic indicators (Kinder Morgan pulling out, a softening housing market along with Trump + NAFTA fears to name a few). With that said, my opinion is that this doesn't look like a correction so much as a market overreaction to political "business-as-usual". Still, from a technical perspective it looks like thankfully things will return to a bit of normalcy soon.
It's been a wild ride for commodoties over the past 18 months. In my opinion, we're finally beginning to see the bottom of the recent market sell-off and due to global instability + constriction of supply, I believe that commodoties are due for an epic rally.
Here are the commodoties I'm bullish on:
- Cameco, based out of the Athabasca Basin in Saskatchewan and one of the world's largest producers of high-grade uranium, shut down operations in January due to market oversupply and suppressed prices (lasting for approx the next 9 months).
- Russia responded to the recent sanctions by restricting uranium supply to US nuclear energy producers.
- Many nuclear reactors have come back online (including in Japan), while new reactors continue to be built in Japan, Russia, China, India, Pakistan and the USA.
- World energy demand is increasing, not decreasing as is evidenced by the construction of new reactors noted above. In addition, demand for "clean-burning" fuel is increasing, and contrary to what many environmentalists are saying, solar technology is not quite sophisticated enough to completely replace world demands yet (though I believe that will come in time and could work very well along with conventional fuel sources to help us meet climate change goals).
Let's take a look at a couple of uranium stocks I'm bullish on:
As you can see, Fission Uranium Corp ($FCU.TO) already appears to be breaking out on news of the recent Russian supply cut. But let's take a look @ the long-term chart, which IMO is even more interesting:
Uranium has formed a very nice looking trough over the past 2 years. I believe this recent breakout could be signalling the start of what is potentially shaping up to be a very epic rally indeed.
On the exploration front, I'm partial to CanAlaska Uranium ($CVV.V):
Take a look at the perfectly formed symmetrical triangle on the 5 year weekly chart, the rising RSI / CMF, plus the green elder candle signalling a possible breakout to the upside (provided Uranium continues to show strong demand throughout the rest of the week).
One of my favorite commodities right now is Dr. Copper - why you might ask? Because it's in absolutely everything. Copper is, in my opinion, a good indicator of economic strength: when things are booming and industrial demands are rising, so too does copper. Those who follow the market know the economy hasn't been great over the past few years (no, a rising S&P 500 does not indicate a strong economy).
Here are just a few of the applications the doctor has ordered over the next 5 years:
- Electric cars
- Construction / industrial (especially with Trump in the oval office)
- Rising technology demand (spaceflight, cryptocurrency)
In addition, Copper has been in approximately a 4 year downturn, and is now starting to claw it's way back out. Take a look @ the monthly chart:
The long-term chart on copper looks strong, with a positive CMF divergence and the stock climbing avove both moving averages, and the 2-year + 5-year averages about to cross.
Here are some of my favorite copper plays at the moment:
Copper Mountain Mining Corp ($CMMC.TO)
You might have noticed that this stock mirrors the movement of copper quite closely. It has been pulling back for approx. 6 months, and has finally reached below the 200 moving average which is still pointing upwards indicating a positive long-term trend. In addition on the weekly chart we can see the MACD beginning to curl up and the stock is in a nice channel with a clear bounce off the support.
Lastly, Copper Mountain recently received shareholder approval to acquire Altona, an Australian company that will effectively double their output. Personally I believe Jim O'Rourke knows what he's doing (not to mention Marin Katusa sits on the board of directors as a majority stakeholder). I think Copper Mountain has picked an ideal time to purchase another company as copper looks poised to break out and reach new highs.
Wow, where should I begin? Actually, I won't go into too much detail other than to say that this stock has a sordid history and a long tough road ahead of it. With that said, I believe the infamous Pebble Project is due for a turnaround soon - you can read my October 2017 article on the subject if you're interested in learning more.
Now on to the technicals: the stock is right now holding quite strongly above the 200 week moving average after a nasty short attack. For those who have followed the politics behind this stock over the past 2 years, it is no secret that there is some big money involved here who does not want to see this company succeed.
But let's take a closer look: After a nasty gap down, which in my opinion will most likely eventually fill, we have a very suppressed 50 moving average which is now beginning to curl up. In addition there is a large gap to get back to the 200; this stock looks very oversold here.
The stock sold off hard when Northern Dynasty finally reached what long-term investors have all been waiting for: A framework agreement with First Quantum Minerals. The stock then sold off even more when EPA Administrator Scott Pruitt announced that he would not withdrawal the Proposed Determination like he originally said he would.
Finally, as if to send a final message that this stock is dead money, the deadline for First Quantum to sign the Framework Agreement was extended, sending shivers down the spine of investors.
But let's take a look at what the emotional Mr. Market appears to be overlooking:
- The framework agreement was only extended until April 30th, 2018. That is only 3 weeks away from the previous date of April 6th, and 2 weeks away as of the time of this writing. This begs the question: Knowing full-well the long political history of the mine, if First Quantum wanted to back out of this deal, isn't it highly likely that they they would have done so already, letalone approached Pebble in the first place?
- Scott Pruitt didn't stop Pebble from proceeding, as many short sellers and anti-Pebble activists would have gullible investors believe. In fact, he has provided political cover by lawfully providing a fair and due process for both proponents and opponents to voice their concerns.
- The stock appears very oversold, with a large pool of institution holdings including majority shareholder Gordon Flatt who loaded an additional 500,000 shares of NAK in December (at more than 40% above the current market price)
Finally, as of this week the stock appears to be reversing on the hourly chart:
Gold / Silver
My thoughts are that the nasty sell-off in gold and silver was driven mostly by a large rotation of money into technology, marijuana, and more importantly cryptocurrency / bitcoin. Now that the crypto bubble has finally popped (not to mention many governments cracking down on the taxation and tracking of cryptocurrencies), my thoughts are that people will again begin running back to the classic hedge: gold, especially with the current perception of risk and global instability.
My opinion is that gold and silver stocks are heavily manipulated. I don't hold any at the moment unless you count $NAK / $NDM.TO which is a binary play, so personally I would steer clear of anything except the largest producers like Barrick ($ABX) and First Majestic Silver Corp ($AG)
Everybody is focused on Elon Musk - the guy gets both a lot of praise and a lot of flak. I don't think there is a more controversial figure out there unless you count President Donald J. Trump; people seem to be completely divided as to whether ($TSLA will succeed or not. Personally I believe it will be a success - I have seen more and more Model X and Model S cars around Vancouver and I swear I even saw a Model 3 with the camo paint being tested on the Sea-to-Sky highway last year. I also believe we are now past the tipping point for electric vehicles.
What we see here is a very nice divergence on the Chalkin Money Flow Index (CMF) a nice long-term uptrend on the 200 moving average, and the end of a long falling wedge sitting on what looks to be a strong .95 CAD support.
In addition to being situated in what has already proven to be a lithium-rich area in the Cauchari-Olaroz region of Argentina, Advantage Lithium clearly has shown promisng results because they've already received funding from both Toyota automakers and Orocobre, a major lithium producer.
Overall, I believe lithium demand will only continue to rise given the popularity of electric vehicles and the increasing global demands to reduce climate change, and I think Toyota's investment in a lithium junior only speaks more strongly about that.
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