3SOF

Earnings were out on GG:

Goldcorp Reports Ten-Fold Earnings Increase to $98 Million on Gold Sales of 543,000 Ounces for Second Quarter


Estimates were for 25 cents a share and they came out 28 cents per diluted share. Q2 revenue was $301.6M.

Let me see, if earnings remain constant for the entire 2005 they will be $1.12 a share. This gives me a P/E Ratio of $18/$1.12 = 16. That's not expensive, not at all, for a company whose earnings grew 1000% from a year ago.

Costs went down: «Total cash costs more than halved to $52 per ounce compared to $116 per ounce in 2004». This company is producing gold at $52 per ounce and selling it at $430 an ounce, that's outstanding !

Another highlight:

«Goldcorp is the world's lowest-cost million-ounce gold producer with safe, profitable and sustainable mining operations throughout the Americas and in Australia. Production in 2005 is expected to exceed 1.1 million ounces at a cash cost of less than $60 per ounce. The company has a strong balance sheet, no outstanding debt and no hedging. Goldcorp expects a 40% increase in annual production to 1.6 million ounces of gold by 2007 due to organic growth, and the company also intends to grow through acquisition.»

1.1 million ounces in 2005 * ($432-$52) = $440,000,000 in profits for the year. Dividing that by the number of shares outstanding we get $440,000,000/336.3 million common shares outstanding = $1.31 is another estimate (perhaps more reliable) than the previous one I've made. With earnings of $1.31 the P/E ratio would be $18/$1.31 = 13.74, which is extremely attractive.

More, the company expects an increase of 40% in ounces produced and sold in 2007 to 1.6 million ounces. If they are able to keep the cost per ounce at $52 and gold bullion averages $500 in 2007 (I'm a long term bull on gold), the company will make ($500-$52)*1.6 million = $716,800,000, which again divided by the number of shares outstanding gives us $2.13 in profit per share in 2007 and a forward P/E ratio of $18/$2.13 = 8.45.

Considering all this I have to change my trading plan and let the profits run on GG. I always said I needed a strong reason to change the initial trading plan, a change in fundamentals. I believe we've had that with this earnings report. I guess GG will go a lot higher than the $18.69 technical target of the breakout. And since I have a 12% profit already on GG, why not respect RULE 13 and let the profits run?

That's what I'll do, continue to hold GG for the foreseeable future.

Mr. Randolph
Any technical comments on todays large selloff on huge volume? Are we still OK technically? I ownder what sparked this large selloff since gold was up nicely on the day.

Also can you comment on yet another downgrade from UBS which ironically occurred right as the CC call started. That leaves only 2 buys and 11 holds and 3 sells now. Thanks again

QuoteMr. Randolph
Any technical comments on todays large selloff on huge volume? Are we still OK technically? I wonder what sparked this large selloff since gold was up nicely on the day.

I wouldn't call a 1.8% drop a large sell off armoredsaint. I believe this was due to profit taking on the news. Yes, we're still OK technically, we'll get to that in just a moment. The fall probably occurred because of something more than 100 years old on Wall Street: «Buy the rumor, sell the news».

QuoteAlso can you comment on yet another downgrade from BUS which ironically occurred right as the CC call started. That leaves only 2 buys and 11 holds and 3 sells now. Thanks again

I haven't seen the arguments behind the downgrade, but it is a bullish thing to have more people bearish than bullish on a stock with a long term uptrend as G. If all of us were bulls, who would be there left to buy?

G rose from $16.44 to $18.60 in anticipation of a better than expected earnings release. The stock left some gaps opened along the way. Now it's coming down to fill those gaps, on people selling the news and taking profits.

I've changed my plan on GG and I will let the profits run as long as they keep growing. So the stock must continue to trend higher. My new plan is to hold the stock as long as it closes above the ascending trendline on the chart, which for tomorrow will stand at $16.41.

Looks like it perfectly closed all gaps and is now primed for a new launch.
Mr. Randolph I am still a newbie when it comes to technical charting and wasa wondering if you can tell me if there was an island top in GG's chart the last week of trading and if yes whats the implications for that type of formation? Thanks again

Quote from: armoredsaint on August 17, 2005, 03:16:13 PM
Looks like it perfectly closed all gaps and is now primed for a new launch.
Mr. Randolph I am still a newbie when it comes to technical charting and was wondering if you can tell me if there was an island top in GG's chart the last week of trading and if yes whats the implications for that type of formation? Thanks again 

Yes, the formation might be considered an island top (usually it's called a «reversal island top»), since the stock left two gaps, one on the way up, and another on the way down. The implications are bearish short term and possibly longer term. We still don't know.

The trend is defined by an ascending trendline, and as long as the stock closes above that trendline one must consider the bullish trend is still pretty much in place. The top might be just a short term one. GG may come down to test support again and then it shoot to new highs.

I believe in this scenario, but although I made those fundamental considerations doesn't mean I won't sell if the trend suddenly changes: the market always knows better.

It's a strange thing, because I'm bullish on gold and bullish on the USD. I don't think this inverse relationship between gold and the dollar will last much longer ... gold will go up on its own fundamentals, not because of currency arbitrage.

Anyway, support for GG will stand tomorrow at $16.50, one thing is 90% sure, I won't lose money on this trade !

After reading more on this island reversal pattern I am  taken by its relatively rare occurence and how it usually affects stocks with horrible news after a gap higher on anticipation of great news. How can a stock with the fundamentals of GG and great earnings be in this terrible situation? I am beginning to believe that the large short funds in this are playing games and shenanigans

Did you notice one slight but very important market behavior today? The dollar was up and gold bullion was up too !

That's what I've been saying, gold will rise on its own fundamentals, not because of currency arbitrage. It's starting. Let many participants notice this macro economic change and watch gold related stocks fly through the roof.

I'm a long term bull and holder of GG, as long as the market agrees with my theory, which is the same as saying as long as the stock maintains its long term ascending trend.

Quote from: David Randolph on August 17, 2005, 07:11:29 PM

Yes, the formation might be considered an island top (usually it's called a «reversal island top»), since the stock left two gaps, one on the way up, and another on the way down. The implications are bearish short term and possibly longer term. We still don't know.

The morning of October 23, 2003, when Applied Materials (AMAT) put in a Bearish Island Reversal from a Double Top, I remember reading on an internet board that it had to be horribly bearish.

Here's how it played out:

Nice example Melf Elf, in that case the bearish reversal island was followed by a bullish reversal island. The white candle on the break was a warning that the pattern indication wasn't very reliable. It's great you now can post Metastock charts, please keep them coming 

Considering GG, I've noticed today that those two red candles after results were induced by downgrades from analysts, from buy to hold. There are downgrades and downgrades, and these two seem silly to me and should not be followed.

Nice white candle today on GG ... it would be bullish if the stock closes Monday above $17.63, that would invalidate the bearish reversal island we've been talking about. It would also be bullish if GG is able to break to new highs without having touched support ... it's bullish if bulls can't buy at support levels, it means demand is strong.

Who downgraded GG in last few days?

I checked Yahoo. The latest is from JP Morgan on July 20 from Neutral to Underweight.

Since its downgrade, the share price gained 20%.

Many times, the market just wants to scare you so you will not dare to buy it.

After all weak hands cleared, they will the stock higher and higher.

I have been extensively & professionally involved in technical analysis for nearly 40 years & my work tells me that 2 stronger candidates in the Gold sector are RGLD & MDG ! Check out their charts & technicals .Superior to GG!

Buddyboy

Buddyboy
Meridian is a mess with all kinds of troubles with Esquel and the local populace demanding they leave. GG has outperformed both of these stocks over the past 2 years

Mr. Randolph

Was today a bullish island bottom or was it negated by the down close in the afternoon?  What is your take on the chart after today? Thanks again

This chart shows a comparison of the gold price to the HUI Gold Bugs index so you can see when gold stocks outperform gold itself. The best time to own gold is when it break out of the trend and is above the moving average as shown here.



also gold broke out but fell back so need to be watched





There are many gold stocks that look good but just not at the moment as you want to buy when gold is moving. Also commercial traders are now short way too many contracts as they usually make accurate calls so may be good to wait a and see how their position changes.

Nice chart and analysis on gold and gold stocks metro, thank you 

Quote from: armoredsaint on August 22, 2005, 04:06:29 PM
Mr. Randolph

Was today a bullish island bottom or was it negated by the down close in the afternoon? What is your take on the chart after today? Thanks again

Hello Mr. Armoredsaint 

No, today it was no bullish reversal island, since at the close there wasn't any gap up. The candlestick pattern we're dealing on GG is a meating lines pattern, a bullish continuation pattern. I'll post something about this pattern next.

My plan is to hold GG for as long as it shows an uptrend, which is defined by closing above the ascending trendline which today will stand at $16.73. Since I've bought the stock at $16, this plan almost makes sure that I won't lose money on this GG trade and it works as a trailing stop, letting the profits run and protecting them at the same time.