The bull market in gold is 10 years old and is still strong. It has not yet undergone its speculative third phase. What to do?

I could blab for days about what we might do or what might happen, but why not be honest and skip the blabbing? What have I personally done? I’ve got a house fully paid for, I’ve got two cars that I bought for cash, I’ve got a wife who is smarter than I am — our assets are about one-third gold, one-third cash, and our home plus two town-houses. – Richard Russell of Dow Theory Letters

The following article from the Gold Prices Newsletter

Gold prices are currently standing at $1153.90/oz having been through a period of consolidation despite the US Dollar making good ground. We have warned in the past that this is a volatile sector and the first few months of this year have been turbulent, however the trend is still up so we are sticking with it.

As the above chart shows gold prices are making steady progress with both the 50dma and 200dma rising in parallel to add support, with the technical indicators more or less in the neutral zone.

The cast of performers who have featured in our articles over the past few months has included Ben Bernanke, Grandich, Soros, Nadler, Casey, Rule, Embry, Rogers, Yellen, all adding to the rich tapestry of the precious metals landscape. We have also looked at a few companies that we don’t have an investment in but are taking an interest in, such as Lihir Gold, Centerra, Oceanagold Corporation, Iamgold Gold Corporation, etc. And, in response to requests from our readership we have started a premium options trading service which has been well received with new investors signing up everyday. The cost for this service is $99.00, however, the last 8 trades have all generated a good profit giving our subscribers reason to smile. The attrition rate, the number of investors who terminate their subscription, is less than 2% which tells us that they are happy to stay with us. Many thanks to those of you who have joined us on this little adventure we really do appreciate your support.

Our portfolio as been updated as follows:

Randgold Resources Limited (GOLD) On the 18th of June 2008 we bought Randgold Resources Limited for $37.65. This stock quickly rallied to $55.00 before being caught in the ensuing sector sell off to trade as low as $27.70, on the 28th May 2009 we sold our entire holding for an average price of $68.69 for a return of 82.44%. This is a quality gold producer so we waited patiently for a suitable entry point at cheaper price levels as per our post “ Randgold: As Good as it gets” when Randgold traded at $58.71 and we wrote the following:

If you made a purchase at this point then well done, however we held out too long and missed the buying opportunity by being too tight, rats! Randgold is now at $81.41.

Agnico Eagle Mines (AEM) we originally paid $30.88 and it now stands at $61.16. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $63.27, locking in a profit of 104.8%. On the 24th July 2008 we bought again at $59.17 doubling our position with the average cost now standing at $45.03. Due to mine commissioning/start up problems the stock was aggressively sold off and closed recently at $57.02, having suffered through dramatic oscillations, however, the old buzzard has started on the road to recovery and last traded at $61.16.

On the 25th January we bought some stock at $53.24 with the intention of making a short term trade, this move is currently up 15% but we had hoped for better. We may have to settle for a small profit shortly, but we are under no pressure to sell and we are expecting gold prices to move to higher ground.

Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signaled to our readers to “Add To Holdings” at those discounted levels of around $11.66. We also gave another ‘Kinross Gold BUY’ signal when we purchased more of this stock on the 20th August 2007 for $11.48. On 31st January 2008 we reduced our exposure to this stock when we sold about 50% of our holding for an average price of $21.96 locking in a profit of about 93.60%. On the 24th July 2008 we doubled our holding with a purchase at $18.28 giving us a new average purchase price of $14.50. Kinross closed on at $18.13 yesterday, we had expected a better performance.

Silverado Gold Mines (SLGLF) We have a token amount of this stock in the event that one day they do find the elusive mother load but we are not holding our breath. The stock dilution is such that there are now 1.5 billion shares in the company, just a tad too many in our opinion.

Yamana Gold Incorporated (AUY: NYSE) we paid $9.37 on 27 September 2006, and we bought again at $12.89 on the 7th December 2007 and so our average price moved up to $11.13. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $16.50 locking in a profit of about 49.41%. Then on the 3rd April 2008 we bought our Yamana position back at $14.43 in expectation of a bounce, which arrived on the 23rd May 2008, and we sold for $16.00. On the 11th July 2008 we bought again at a price of $14.95 taking our average purchase price up to $13.04. This stock closed at $10.38 yesterday, so we are still looking for a significant increase in performance by Yamana.

High River Gold Mines: (HRG: TSX) We bought this at $2.49 and we increased our position in the company on December 7th, 2007 and we are still holding on to it despite the wrangle of attempted take overs by others. HRG closed at $0.81 yesterday, so we are still making progress, albeit slowly.

Fronteer Developments Group (FRG) Fronteer was originally bought as both a uranium and gold play as FRG owned the lion’s share of Aurora Energy Resources making it a gold/uranium play. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$5.97 so we are now in positive territory with this portion of the purchase as our our original purchase was made on the 15 July 2006 at around the $4.70 level, so we are sitting on a small gain at the moment. Still expect this group to do a lot better and it is getting there slowly.

Fronteer Development Group Inc., acquired all of the remaining common shares of Aurora Energy Resources Inc. So this investment is well and truly a two pronged attack via both gold and uranium.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Please check out our website at:
http://www.raymondjames.ca/jamieswitzer

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Market Summaries

S&P/TSX Composite up 1.40% to 12240 (up 4.20% year-to-date)
S&P/TSX Venture Composite up 0.02% to 1670 (up 14.30% ytd)
Dow Jones Industrial Avg up 1.70% to 11204 (up 7.40% ytd)
Nasdaq Composite up 2.00% to 2530 (up 11.50% ytd)
Oil (West Texas Intermediate) up $1.18 to $84.42 (up $5.06 ytd)
Gold (Spot USD/oz) up $18.92 to $1156.32 (up $59.37 ytd)

Spring/Summer trading strategy…

Following a 13 month-long rally that has seen the TSX rise over 60% and the S&P 500 over 80%, we have recommended our clients move away from all index-related investments. Most broad-based equity mutual funds and equity indexes have been shed as we hit a typically slow stretch in the equity markets. Based on performance, May, September and February have historically been the worst months for the TSX and after this sharp move higher on the indexes, it’s hard not to believe things are shaping up for another quiet period. While we are not in the “crash” camp, we are anticipating an index that has trouble moving materially higher and a market that provides investors with “opportunities” rather than the easy-money environment we have just experienced. Now that we have eclipsed the one-year anniversary of “the bottom,” companies will find it increasingly difficult to beat or even meet analyst expectations on upcoming earnings. As 2010 progresses, the weak data of 2009 that has acted as a catalyst for heroic earnings announcements will become a thing of the past. The year-over-year comparables will be off of data within the recovery will become increasingly hard to match or exceed.

Going forward, we are focusing on individual names that still possess significant value at current levels and decent downside protection. We will be picking up high-quality, income-paying common stocks and trusts while still looking for trade opportunities as different sectors “take turns” going on runs. Pulp and paper along with OSB-focused names are taking their turn in this trader’s haven, following the likes of copper, energy and gold which have all had recent runs. The Canadian financials moved early on in the rebound and have now traded sideways for a few quarters, and could be providing a nice entry point in the coming weeks. 

Historically low interest rates and a lack of stock market euphoria probably signal we have yet to reach a market “top,” but we are preaching a more disciplined and selective approach rather than a blanket index buy at this stage.

Soundbites

• Pixar Canada, the Vancouver “offspring” of the California-based animation giant, will be up and running by early August. Pixar Canada GM Amir Nasrabadi says the firm already has 20 employees and plans to more than double that over the next 18 months. The company will initially set up shop in a 7000 sq ft space in Gastown but already has designs on a much larger space, with a 20,000-25,000 sq ft office in mind. The studio will make animation “shorts” using characters from a number of Pixar’s feature films, such as Buzz Lightyear and Woody from Toy Story, and Lightning McQueen and Matter from Cars.
• The already despised Harmonized Sales Tax (HST) tax, which most are dreading come July 1st – is ready to rear its ugly head a few months earlier. The majority of the public is unaware that a “pre-collection period” will begin May 1st, affecting any goods paid for after that date but not to be delivered until post June 30th. Any goods paid for prior to June 30th will be exempt, even if the delivery date falls after the HST’s full implementation. This will be a shock for those buying big ticket items such as annual membership dues, airline tickets or various season passes to sports or live entertainment.
• An oil rig immersed in flames sunk Thursday into the Gulf of Mexico, leaving 11 workers dead and sparking fears of an environmental disaster. The Deepwater Horizon rig burned for more than 36 hours after a massive explosion hit the rig late Tuesday night, sending fire balls high into the sky. The US Coast Guard kicked into high gear and managed to rescue 115 from the platform but 11 were unable to be located. Environmental agencies are working feverishly to get a grip on the situation due to the fact the platform had 2.6 million litres of diesel fuel on board and the semi-submersible platform was pumping 8000 barrels of oil per day at the time of the accident. The rig is owned by Transocean Ltd and had been contracted to oil giant BP.

Marketwatch – A Look at the Week’s Newsmakers

Apple Inc (APPL) – announced stellar Q2 earnings results on the back of surging iPhone and MacIntosh personal computer sales. Profits shot up 90% from the same period in ’09 to $3.07 billion USD on revenue of $13.5 billion. This caused Apple shares to surge to new all-time highs, closing Wednesday’s session at $259.22 USD. The outlook for Apple is just as rosy with extraordinary sales and early reviews for the new iPad, combined with increasing iPhone sales which appear to be cutting into RIM’s Blackberry marketshare.
Ballard Power Systems (BLD) – the Burnaby-based fuel-cell developer has agreed to sell its suburban headquarters in for $20.75 million to help free up cash to fund further development of its products. The buyer, Madison Pacific Properties, will lease back the 117,000 sq ft property to Ballard for the next 15 years, with options for two, five-year renewals. The company, which develops and manufacturers hydrogen fuel cells to power forklifts and backup electricity systems, has fought an uphill battle to get to profitability – something the firm intended to do years ago.
Teck Resources Ltd (TCK.B) – after hinting Wednesday that a dividend re-implementation may be back on the table, Teck did just that Thursday, committing $236 million annually to a dividend (or 20 cents a share). “The surplus cash is really starting to roll in now and, actually, we’re going to enjoy that for a while,” CEO Don Lindsay said on a conference call Wednesday. Going from being $10 billion in debt and facing possible bankruptcy to having “excess cash” in less than 24 months is astounding and has caused many of Lindsay’s critics to go very quiet. The company has repaired its beleaguered balance sheet and regained its investment-grade rating from three of four ratings agencies’ (with Moody’s expected to upgrade the company shortly). Teck paid out nearly a half a billion in dividends in 2008 before the commodity collapse put the firm in dire straits.
Goldman Sachs Group Inc (GS) – the young banker caught in the centre of the Goldman Sachs fraud is reportedly set to defend his actions this week before the Senate. Fabrice Tourre, who goes by the moniker “Fabulous Fab,” will testify alongside company CEO Lloyd Blankfein, if he shows. Tourre had agreed to testify before he was included in a slew of charges by the SEC and many close to the situation doubt he will show up. Legal experts doubt he will want to potentially implicate himself further or open up the opportunity for the SEC to use these testimony against him in future legal proceedings.

“Quote of the Day”
“The whole building is about to collapse anytime now. Only potential survivor, the “Fabulous Fab”…standing in the middle of all of these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!” – 31 year-old Goldman Sachs junior trader Fabrice Tourre in an email to co-workers  

JAMIE SWITZER | Raymond James Ltd.
Senior Vice President, Financial Advisor
North Vancouver IAS
PH: 604.981.3355 | FAX: 604.981.3376
jamie.switzer@raymondjames.ca

MARC LATTA | Raymond James Ltd.
Senior Vice President, Financial Advisor
PH:604-981-3366 | FAX: 604.981.3376
marc.latta@raymondjames.ca

Suite 480, 171 West Esplanade
North Vancouver, British Columbia

This newsletter expresses the opinions of the writers, Marc Latta and Jamie Switzer, and not necessarily those of Raymond James Ltd. (RJL)  Statistics and factual data and other information are from sources believed to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.  It is not meant to provide legal, taxation, or account advice; as each situation is different, please seek advice based on your specific circumstance. RJL and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Within the last 12 months, Raymond James Ltd. has undertaken an underwriting liability or has provided advice for a fee with respect to the securities of the Royal Bank of Canada. Raymond James Ltd is a member of the Canadian Investor Protection Fund.

Stockscores.com Perspectives for the week ending April 25, 2010

In this week’s issue:

Weekly Commentary
Strategy of the Week
Stocks That Meet The Featured Strategy

It has been said that up trends build on worry and doubt and end with unbridled enthusiasm. Recalling the tech stock bubble in its infancy, every tech stock that was moving higher was met with pessimistic commentary. Analysts cited valuations that were too high as a reason that the up trend must end. Yet, these stocks continued to march higher, building with the confidence of the investors that bought them.

Early in 2000, the prices of these stocks were legitimized using new valuation models that seemed to be concocted with the same irrational exuberance as that which prevailed in the market. Everyone was making money and thus, everyone was happy to continue buying.

Of course, the bubble eventually burst, leading to a sharp and intensive sell off. Those who still believed in the technology dream stuck with their stocks like a sinking ship’s good captain. And they got punished.

This experience sits in the memory banks of investors and, when the next up trend begins to build, the fear of a repeat performance causes many to sit on the sidelines and watch the market go higher. With each week of price ascension, the doubt about its legitimacy lessens.

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Doubt causes investors to miss out on great opportunities. They look at what is happening in the world and transfer that perception to the stock market, failing to recognize that what is happening the world today has little to do with what is happening in the stock market.

The stock market is not about what is happening today. The job of the stock market is to look ahead, to guess at what will happen in the future. If you make your investment decisions based on what you know today instead of what you think could happen in the future, you are destined to be a very average investor.

Don’t worry about the stock isn’t, trade what it is.

If a stock is going up, it is because people want to pay more for it. Don’t fight what the market is telling you, just go with it!

Why do investors put so much emphasis on what might happen? Perhaps it is their need to hedge against pain. The desire to avoid losses keeps people from realizing great gains. Fear governs their decisions and causes them to not hear the message of the market.

Consider this simple question. How long does it take for you to sell a stock?

Today, with advanced in technology and the availability of the Internet from even your cell phone, the answer is less than a minute. So why do we think that exiting a stock that is in trouble is such a big deal?

You may not believe in the strength that the market is showing, but don’t let that doubt keep you out of a strong trending market. Trends do not reverse overnight. If a stock you buy breaks down and hits you stop loss point, sell it. You don’t have to ride it down to the bottom as a show of loyalty to your decision.

I can’t recall a market that ever made sense to me. This is because the stock market always leads the facts, we only find out afterward why a stock went up. Rather than try to be smart, just do what the market tells you to do. Being a good listener will make you more money than trying to make sense of what is going on.

This week, I ran a Market Scan that looked for an abnormal price breakout on abnormal volume. Lots of candidates, here are two stocks that stood out with a good chart pattern.

1. T.COB

T.COB breaks through resistance at $1.25 after stalling under that price ceiling for nearly five months. The breakout was accompanied by strong trading volume. Support at $1.20..

2. CMS

CMS has formed an ascending triangle pattern over the past five months with resistance at $16. On Friday, it broke through resistance with abnormal volume, indicating it has a good chance to go higher. Support at $15.60.

‘

References
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Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.

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Tyler Bollhorn started trading the stock market with $3,000 in capital, some borrowed from his credit card, when he was just 19 years old. As he worked through the Business program at the University of Calgary, he constantly followed the market and traded stocks. Upon graduation, he could not shake his addiction to the market, and so he continued to trade and study the market by day, while working as a DJ at night. From his 600 square foot basement suite that he shared with his brother, Mr. Bollhorn pursued his dream of making his living buying and selling stocks.

Much of Mr Bollhorn’s work was pioneering, so he had to create his own tools to identify opportunities. With a vision of making the research process simpler and more effective, he created the Stockscores Approach to trading, and partnered with Stockgroup in the creation of the Stockscores.com web site. He found that he enjoyed teaching others how the market works almost as much as trading it, and he has since taught hundreds of traders how to apply the Stockscores Approach to the market.

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.