GG

[vic666]

Folks,

After today's 25 basis points interest rate hike by the Fed and their comments that seemed to indicate possible stoppage of further rate hikes...the dollar fell sharply, base metals rose and so did precious metals like GOLD.

Right after May 11 when the general marke took a nose-dive, so did the commodities, including gold...price per ounce of gold fell from highs of $730.00/ounce to around $570.00/ounce recently.

Today, gold is back up above $600.00/ounce and it broke the downtrend line that started May 11. Atleast until mid August when the Fed meets again, the precious metals sector looks like it's gonna reverse the recent downtrend and go back up...may be far enough to challenge the high of $730.00/ounce

Stocks like GG (Goldcorp) corrected all the way from $41.62 in early May to $24.06 in just over 1 month!!! Coincidentally, that price level also happened to be the 200 DMA support level. The stock hit $29.43 at closing today and looks set to resume the uptrend due to the general bullishness in the precious metals sector after today's Fed meeting.

First resistance is 50 DMA of $31.33, after that, I do expect a steady rise to the 52 week high.

Fundamentals also seem to support the gold market due to fears of a weakening dollar, threats of continued inflation in the market, rising oil prices, rising trade deficit (primary reason for the weakening dollar).

Here's a comparison of various gold mining companies...

http://finance.yahoo.com/q/co?s=GG

Here's a site to track live gold spot prices in the 24 hr world market:

http://www.kitco.com/
http://www.kitco.com/charts/livegold.html

Finally, here's a 6 month daily chart for GG:

Happy trading to all! 

[willey]

GG

Chart shows me that it should climb to form a right shoulder in an inverse head 'n shoulders setup...once this right shoulder is complete, then a challange to recent highs could ( & should ) be in order

$XAU index should concurrently climb to 155 to 170 range & fail there! ( probably )

GG will probably fail to make new highs at this time, I believe, & will fall back for a long regroup along with many other golds & silvers.....

Great trading opportunity!

good trading to all

willey

[willey]

GG

Building that "right shoulder" now.  Upon completion, the "measured move" should result in $40 per share.  Not too shabby!  I'm in for the ride!  I also recognize this is a trade & gold is unlikely to make new highs at this time, so will sell this puppy at around $40 per share & wait for the next correction to unfold.

good trading to all...............

willey

[sebfr]

Hi,

we can see a "head and shoulders"...Bad sign...

[Melf Elf]

GG broke below an Ascending Triangle on August 31 on the announcement of the deal with GLG.  It re-tested the breakdown and failed right at the trendline, MADE the 24.07 target, then MADE the 20.85 target this morning.

cumulina,

That turned out to be the low.

Hopefully, you'll get a bounce.  Good luck!

Up 22.9% off the low.  Nice bounce!

GG put in a Bullish Island Reversal during the formation of the Head in this Bullish Inverse H&S pattern.  There was a gap down on October 3...then a gap up on October 13, leaving a little island in the Head.

That's bullish, with further upsdie confirmation, which came on the breakout of Inverse H&S on Wednesday.  27.95 is IN PLAY, as long as GG trades above the neckline.

As you can see from the chart, the target area is where the Ascending Triangle broke down.  That pattern is much larger than this rather small Bullish Inverse H&S pattern is, so a pullback here would look a bit better. 

The 27.95 target area "should be" pretty good resistance if GG gets up there. 

The 200DMA also is at 27.9664 , providing addtional resistance if the target gets MADE.

Good luck, cumulina!

[Melf Elf]

GG put in a Bullish Island Reversal during the formation of the Head in this Bullish Inverse H&S pattern.  There was a gap down on October 3...then a gap up on October 13, leaving a little island in the Head.

That's bullish, with further upsdie confirmation, which came on the breakout of Inverse H&S on Wednesday.  27.95 is IN PLAY, as long as GG trades above the neckline.

The Inverse H&S target of 27.95 MADE yesterday, and more.  GG closed at its high, 28.67.

Hey take a look at AUY for the gold play, been in since 8.50 but I also day trade it for 5k shares at a time along with core position, talk about predictability............nice and steady.

Holygrale,

Interestingly, GG got "Cramerized," as cumulina puts it, when he recommended a switch out of GG into AUY,  on Octber 27.  I don't know how the two stocks performed since then, comparatively, since I don't have AUY in my data base, but I hung in with GG, and was glad to see that the target got MADE.

GG broke below an Ascending Triangle on August 31 on the announcement of the deal with GLG.  It re-tested the breakdown and failed right at the trendline, MADE the 24.07 target, then MADE the 20.85 target this morning.

cumulina,

Hope that you're making some nice $$$ on this one.     It's now up 41% off the Oct 4 low.

[David Randolph]

1. Introduction

Thanks for the great analysis on this thread fellow 3 Stocks members  . It looks like vic666 was a bit early on his bullishness, but cumulina and Melf Elf nailed it right. Let me tell you what my charts say about GG.

By the way, if you're new to www.3stocksonfire.org and would like to join our great community of stock traders, please register.

2. Profile

Goldcorp, Inc. (GG) engages in the acquisition, exploration, development, and operation of precious metal properties in the Americas and Australia. It engages in mining and selling gold, silver, and copper. The company's operating properties consist of the Red Lake Mine in Canada; the Alumbrera gold/copper mine in Argentina; the Luismin gold/silver mines in Mexico; the Amapari gold mine in Brazil; the Peak gold mine in Australia; and the Wharf gold mine in the United States. Goldcorp also has interests in the Campbell mine and Virginia Gold mines in Canada; the Porcupine and Musselwhite joint ventures in Canada; a 50% interest in the La Coipa gold/silver mine in Chile; and a 40% interest in the Pueblo Viejo development project in the Dominican Republic. Goldcorp primarily develops the Red Lake mine located in Ontario, Canada; the Los Filos gold project in Guerrero state, Mexico; and the Eleonore gold project in Quebec, Canada. In addition, the company, through its subsidiary, Silver Wheaton Corp., engages in silver mining. Goldcorp was founded in 1954 and is headquartered in Vancouver, Canada.

3. Technical Analysis
3.1. All History Chart



When I say "all history" I mean all history as a publicly traded company. This chart only goes back to 1994, but as we read in the profile, the company was founded in 1954.

The long term trend of GG is ascending.

3.2. Medium Term Chart



After that parabolic rise in March and April, GG took a nose dive that surpassed what would be considered a "normal" correction. The stock broke down below its ascending trendline with a gap down and extremely heavy volume on September 9, 2006. Now the stock is actually above that level, retesting the broken ascending trendline.

3.3. Short Term Chart



I used a semi-log scale on this short term chart, because the decline from the May high was so steep that I needed this scale to make correct technical analysis. GG actually fell 51% in just 5 months. Now it's already rising 41% from the lows, so it is a volatile stock. Volume over the last 2 1/2 months has been astonishing and the stock yesterday rose 8% on a powerful white marubozu.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



Oh my, they're printing shares like it's toilet paper. And they will issue 283.6 million more to fund the Glamis acquisition. This company isn't working in a way that favours a share price rise. You need to fully understand this: market cap = share price*number of shares outstanding. If the number of shares outstanding rises a lot, the market cap grows even though the share price doesn't. This might be good for core shareholders, but not good for you and me, since we're looking for share price appreciation, not market cap growth !

4.2. Liquidity



GG had a wonderfull balance sheet, almost without debt and plenty of cash, until 2006. Now, because of its acquisitive path, it took on $369 M in short term debt and $750 M in long term debt. The current ratio fell below the crucial 2 level.

4.3. Revenues



Yes, spectacular revenues in 2005 and expected for 2006. But the market cap is $12 B, for 2006 revenues of just $1.65 B. The revenue multiple is 7.27, still lower than the gold industry, which is 12.39.

I'm a big fan of gold (precious metal) going forward, but I don't know about gold related stocks, they seem so overvalued. They have a lot higher multiples than technology or even internet stocks    I like copper plays a lot more, for example, their multiples are very cheap and copper rose even more than gold and silver.

4.4. Profits



The company lost more money than it made until 2001, when it started delivering some more stable EPS figures. 2005 and expectations for full 2006 are much better than those years. Expectations for 2006 are for $1.1 EPS, so the earnings multiple is $28.67 / $1.1 = 26.

This is high when compared with the market average, but low in contrast with the gold industry, which shows an average P/E of 32.6.

5. General Overview

As I said, I'm a bull on the gold price (as I've been since 2001), but I'm afraid that most gold stocks already reflect that expectation. GG seems to be one of the most attractive in the group, but I really don't like that printing shares machine running at this speed.

I could talk about recent news and the Glamis acquisition, but I don't think there's much use to it. People are too much concerned with what they read in the news, but many times fail to check the balance sheet and the income statements in an historical perpective. I do this looking for inefficiencies in the market and profit opportunities.

If the gold price continues to rise, GG will probably follow that trend, but the risk is quite high in holding gold related shares, because they already have lofty multiples and most are issuing shares, diluting shareholder value.

6. Trading Plan

The trading plan is to stay away from gold related companies. Copper and zinc miners, for example, are much more attractive. The same or even more upside potential in their product price, but a less than market average valuation.

One of the copper plays I'm holding is PCU, closing at an all time high yesterday  Register to get more insight on the 3 Stocks on Fire free Daily newsletter.

[Melf Elf]

Sold Short GG at 27.73.  Stop: 28.81  Risk: a loss of about 4%

GG gapped down on earnings, and has rallied back to UNCH, and back in the green, currently BID 27.80...27.81

TDAmeritrade has no shares available to short.     Got them through Scottrade.

[Melf Elf]

Sold Short GG at 27.73.  Stop: 28.81  Risk: a loss of about 4%

Covered 25% of my short at 26.73.  Gain 3.6%.

I'm lowering my stop on the rest to 28.07, above Tuesday's 28.06 high.  Risk: a loss of 1.2%, so I'll break even on the trade if I'm stopped out.

Interesting short trade.

1. Prior to earnings, GG Double Topped, or made an "M" Top,  at 28.67 and 28.72.  The middle of the "M" is the "sell pivot," so 27.12 in this case.

2. On earnings, GG gapped down below the 27.12 sell pivot, and the high of the first 10-Minute bar was 27.08, so it "looked like" that was resistance.  NOPE!

3. Short squeezing IN YOUR FACE rally off the early morning 26.50 low, all the way back to UNCH, where I wanted to short it.   

TDAmeritrade has no shares available to short.     Got them through Scottrade.

4. I guess that explains the Short squeezing IN YOUR FACE rally! 

It took me four attempts to get shares to short at Scottrade.  I kept getting a message "Only 563 shares available to short."  I finally got the amount that I wanted (shorts were covering, so they became available), so keep trying if you get that kind of message.

5. The short squeeze ended this morning at 28.03, right below Wednesday's high, and right at the 200 DMA, which is why I'm lowering my stop.

6. Notice the Bear Flag fractal (repeating pattern) this morning.  The first Bear Flag was right before realease of earings and the gap down.

GG currently is BID 26.65...ASK 26.67, down $1.11 on the day,

[Melf Elf]

Yesterday's gap down earnings low at 26.60 has been taken out.  That completes another Double Top, or "M" top.

I'm lowering my stop to 27.31, a penny above this afternoon's 27.30 high.  That guarantees me a winning trade from my entry short at 27.73, excluding a gap up above my entry.

[Melf Elf]

[Sold Short GG at 27.73.  Stop: 28.81  Risk: a loss of about 4%

Covered 25% of my short at 26.73.  Gain 3.6%

Covered remaining 75% of my short at 26.42.  Gain: 4.7%  Gain on the trade: 4.4%

My target was 25.57.  Friday's low was 25.76,  and GG now has formed an Ascending Triangle.  If it breaks out to the upside, 27.50 would be IN PLAY, and my 27.31 stop would get hit. 

I decided to take the money.

[Melf Elf]

Covered remaining 75% of my short at 26.42.  Gain: 4.7%  Gain on the trade: 4.4%

My target was 25.57.  Friday's low was 25.76,  and GG now has formed an Ascending Triangle.  If it breaks out to the upside, 27.50 would be IN PLAY, and my 27.31 stop would get hit. 

I decided to take the money.

Adjusting the trading plan worked out fine.  My 27.31 stop just got hit.

[cumulina]

Thanks for keeping up on GG, Melf Elf. And a BIG welcome back to you, David!

Stubbornly holding on to my GG!

I insist on getting my shares up into the green again, and I'm almost there. 
I sold some at a loss, but my average price is 27.69

For now, I only hold mining stock, being very unsure of the market in general.

CDE, CUP, DROOY, GBN, GG, GLE, QEE, TGB.
Most of them "under water" right now, but things are improving.

Being lazy, I am using charts from  http://www.chart.nu/ the site where I got the following charts. Too bad the size of them won't really fit here.

[cumulina]

I hope you are not still short GG, Melf.

I don't know how to annotate (and save... ) this chart, but to me it forms a "Cup w. Handle".

All my little miners are up today, except DROOY - was probably a mistake to buy it anyway.

Now: Here I sit with miners going up-up-up  , all in US$, wich is going down-down-down. 

Sooo, I'm probably just about even! 

But a fun day indeed.

Wonder how much the holiday has influenced gold, US$ and the stockmarket?

[Melf Elf]

I hope you are not still short GG, Melf.

cumulina,

Thanks, I covered it: 

[Sold Short GG at 27.73.  Stop: 28.81  Risk: a loss of about 4%

Covered 25% of my short at 26.73.  Gain 3.6%

Covered remaining 75% of my short at 26.42.  Gain: 4.7%  Gain on the trade: 4.4%

I didn't get long GG because:

1. Possible Double Top in the high 28's, at the 200DMA (dotted red line)

2. The 50/200DMAs are badly inverted

3. The trendline (blue) off the May, 2005 low was just overhead.  GG found resistance there on Friday.

4. There's also resistance from:

a. The June-August, 2006 Ascending Triangle (big patten in red)

b. The May Bear Flag (little pattern in red)

c. $29-$41 - The April rally (GG rallied to 28.87 on Friday, just below there, then sold off a little into the close)

For those reasons, I shorted GG on its first attempt to get through all of that resistance after the 27.95 target MADE, and also for those reasons, I bought AUY instead, on Wednesday's gap-filling pullback to the Bull Flag breakout.  AUY has much less overhead resistance than GG (only 4 candles, May 9 -12, 2006). If AUY can get through those 4 candles, it will be at a 52-week high.