gold penny stock - tag category postings

Supatcha Resources Inc or SAEI appears to be an outstanding gold mining penny stock candidate as we finish up the Thanksgiving week and head into December 2010.  The winter time frame and into new year is usually a good time for huge penny stock moves.

Supatcha Resources Inc  has a very low total authorized and outstanding share count and a low trading float as well.  The trading float is near 30 million which is extremely low for any penny stock trading under .20 cents.  The company has announced a recent share buy back as well.  The recent surge in the gold price certainly paints a backdrop that is favorable as well.  Certainly there is not a 1 to 1 correlation between the gold price movement and the share price of gold penny mining stocks, but it is still a helpful speculative back drop.

SAEI has gold mining properties in the Ukraine, has recently released some drill results there and apparently is due to release some proven and probable reserve numbers near the December 5, 2010 time frame.

If you have read previous posts here before then you will know that I tend to favor the technical outlook versus the fundamental outlook for any stock, whether it is a penny stock or a blue chip stock.  It does not matter to me.  The technical for me has always been the best compass in a sea of rogue waves and market manipulation.

In mid October 2010 SAEI went from a low of about .005 to a high of about .20 CENTS equating to roughly 40 TIMES ones trading capital assuming one had bought at the low and sold at the high.  It also accomplished this in a mere 10 trading days.

This type of massive percent advance combined with the minimum time frame seems to confirm the tight float SAEI works with.

One of the most basic lessons of stock market movement is the A —- B —- C up formation and conversely the A — B —- C  down formation.   The ABC up formation describes a very common market advancing mechanism that is similar to the first three waves of an elliott wave up move.

Essentially what you see is a large and fast impulse wave move UP on heavy volume.  THEN you see a natural retracement of that first leg up as there will always be sellers who want to take at least some profits.  But the real gold is in determining if the penny stock then has enough strong supply demand relationship to halt its decline after the B down leg move and then transfer into a follow on C leg up move which should exceed the peak of the A move up.

This ABC up move is in essence where most of the money is made in penny stocks and that astute observers who can catch them early enough.

Of course there are other patterns at work in penny stocks as well. The cup and handle is a very popular pattern in penny stocks just as it is in other big board stocks.  I am speculating right now that Supatcha Resources Inc is forming a cup and handle pattern and is in the process of finishing the formation of the handle of the cup which would be consistent with possible news in 1 weeks time.

The cup and handle simply describes a pattern where previous owners at the supply range of .20 cents wanted to get their money back and thus caused a selling wave.  But since this is a penny stock we are dealing with these selling waves can seem very large, but that just comes with the territory here.

I have studied the Level II market action on SAEI today the day after the Thanksgiving holiday and see that in the early part of the morning showed very strong bid support in the .125 range.  The big support was about 5 levels deep and there seems to be some small upticks now as well.

In the early part of the day today SAEI also showed a double inside day which basically means that the high of today and the low of today was successively lower than the high and low of the previous two range bars.  This describes a situation of the stock ‘coiling up’ and ready for a big move.

SAEI can move very fast in both directions.  But at this point I have to give SAEI a penny stocks penny stocks rating of 1 as long as it can show a confident close above the .145 range.  I don’t know whether that could happen today, but possibly by next week some time.

The recent 3 days action could be what is known as a ‘running correction’ where the stock is simply too strong to get a real meaningful pullback because the float is in such tight hands.  Still, the requirement is for a move and close above .145 preferably by early next week.

Liberty Star Uranium Corp is the strongest penny stock I have ever seen in my life.  It is nothing short of astounding how strong this penny stock is.  Today a downward correction was fully retraced and LBSR actually closed up on the day.  Truly an amazing recovery today.

We first highlighted LBSR at .03 cents and continue to try to track its movements but admittedly it is starting to fool us more now because it is not following traditional signs of weakness from the indicators. 

Still, the MACD histogram is once again showing a bearish triple M pattern that would only be confirmed if we close below today’s low of .0771.  LBSR has met the measured move from the high tight flag that I mentioned in a previous post about LBSR.  In that post I pointed out that LBSR moved from .03 to .07 or a 4 cent move.  So adding 4 cents onto the top of the high tight flag would lead to a target of 10 or 11 cents which we did.

So the measured move was accomplished and this could be more evidence that we are going to move into a consolidation again. So how do we know if we are NOT ready to start consolidating going forward?  Very simply.  We need to take out the high of .111 cents on a closing basis.  If we do that then LBSR could explode higher again.  I view this as very unlikely for now but I have been wrong before in trying to pick a top too soon here.  But at least more evidence is piling up that we are near a consolidation phase.

The problem is that ‘news’ has not come out yet.  LBSR may want to trade right up into news which may come within the next 3 to 5 trading days (just a guess on our part).  I feel strongly that when and if news comes out, it will mark a turning point for the stock and the beginning of a consolidation period.  Why?  Because price usually moves before news and this penny stock has shown us that this is what it wants to do now.

If LBSR does somehow manage to trade higher again above .111 then there is a stronger previous resistance range at .12 to .14 cents which should stop this penny stock and move it into a consolidation.  I doubt very highly that we will be able to break above .12 to .14 immediately assuming we even get there.

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There is an opening gap in the LBSR price chart.  If we are correct that LBSR is about to do a downward retracement from recent highs, then it would not be out of the question for LBSR to at least do an intra day price move that fills the gap at .038.

We have placed some buy orders ourselves for more accumulation of LBSR at .039.  That level is also consistent with a move that would help to better define the recent uptrend level of the LBSR penny stock price chart.

See the penny stock chart below for more clarity.  The red horizontal dotted line represents the gap level and the two blue up trend lines represent possible uptrend ‘foot support’ if you will where price can find new strong bids again to continue this uptrend.

Here at penny stocks penny stocks we go into more depth and detail on penny stock charts than the top 100 penny stock websites combined.  Penny stock charts have some unique characteristics than other ‘regular’ stock price charts but the principle of technical and chart analysis remains the same.

A lot of times the three white soldiers candlestick pattern which is a very bullish signal is still usually retraced so price can catch its breath and build cause for a new move higher.  The same would be true if you see the three black crows candle stick pattern from a price top.  Usually there is a retracement back topside to help define the new move.

If we do get a gap fill at .038 then it is likely to be a very sudden event that happens only on an intra day basis at which point buyers are likely to come in heavily to support this penny stock . . .

I think Liberty Star Uranium & Metals Corp momentum is drying up a little bit today and we may be due for a short term pullback.  Remember, no penny stock every goes up in a straight line.  It has had a nice strong advance that has been quite persistent since the breakout over .03.  It was a clear sign of strength.

But today at least at mid day volume does not seem to be coming in as strong and the relative strength index on LBSR hit a peak of 87 today well into the powerzone.  The MACD histogram appears to be showing a slight slowing of momentum as well.

So it would seem there are some ingredients for today being a short term top.  We may trade flat to only slightly higher the next 2 days and then possibly drop down to .04 to .045 range as a short term thrust down which will probably be bought quickly.

If we are right about LBSR entering a short correction here then it will most likely be very short lived (at least the worst of it may be) because of the inherent strength of the longer term chart.

It would be particularly short term bearish if Liberty Star Uranium & Metals Corp closes at .06 today because it would create a dragonfly reversal doji candlestick on this penny stock.  Also, we previously mentioned the topping tails of the last few days which is an indication of some supply coming into the stock.

So it would definitely not be the end of the world to get a little pull back in LBSR.  If we are correct about it starting within the next couple of days then the retracement should offer a healthy chance for this penny stock to consolidate and build new cause.

There is an outside chance that the current consolidation is only a pause and could lead to a quick new move higher above .07, but for now that seems like an unlikely outcome.

It is very tough to look too far ahead but if we get a dip to .04 then it could set the stage for another horizontal type trading range that builds cause for an eventual breakout move to a new plateau above .07.  

The mining penny stock LBSR today moved into a consolidation stance and looks like it will finish with a doji indecision candlestick.  There was gain a semi large topping tail on the daily candlestick that somewhat mirrors the topping tail of yesterday as well.

Volume also dried up markedly today and is suggesting in the short term that momentum is starting to shift.

I am going to make a short term forecast for early next week but keep in mind that these short term forecasts can be very variable as far as specific timing.  I think we could go into a one or two day retracement early next week perhaps down to the .042 level as the low point and then some type of intra day reversal back topside again.

The reversal may be enough to get LBSR back up to .07 again which may then cause some new sellers to come in again.  If so, then it could cause a drift down back to .045 again for another retest and then an eventual new trend build higher.

The above forecast is very speculative.  But overall today I have to say that the action in LBSR is still very encouraging.  We have recently completed 3 white soldiers candlestick pattern which is a very strong indication of who is in control.  The fact that we sold off today should not be seen as extremely unusual.  In fact, given the fact that this is a mining penny stock it should be seen as a normal garden variety pull back today.

I am writing this update as of 2:48 PM eastern time on August 13, 2010 and so I cannot be sure exactly how we will close yet on LBSR.  If by some lucky chance LBSR closes near the top of the range today then it may hint that today’s doji candlestick was simply the half way point resting point.  If that is the case then we could trend higher very strongly early next week.  Still, the volume is lightening up today and so my bias is that we consolidate in the scenario I already outlined earlier in this post.

In our opinion, strength has to be the presumption with LBSR.  Any pullbacks should probably be seen as opportunities for accumulation, again in our opinion only.

I really do not have anything negative to say about LBSR as this point.  If the earlier scenario plays out then we should see .043 as the low sometime next week and then an upwards reaction from that level.  I am seeing signs that this penny stock is being accumulated consistently.

One thing I can almost guarantee you is the LBSR will once again move into another sideways type consolidation at a higher level.  This next consolidation will be the key for next price evolution.

I should say that it is also a definite positive for the mining sector in general to have the very seasonally strong month of September coming up.  That is about as good a scenario as one could ask for in terms of timing.  In addition the seasonally strong penny stock trading season also runs from September  to January time frame.  So in our view there should be plenty of room for more upside surprises in LBSR.

Lastly, you probably know by now that I rarely if ever discuss fundamentals here at penny stocks penny stocks dot com.  But I should say though that the fact that LBSR is working a deal with a more established mining company Northern Dynasty Minerals Ltd is an extremely positive sign from a fundamental standpoint.  Northern Dynasty Minerals Ltd current market cap is about 632 million dollars.  I do not ever recall since I began trading penny stocks, when a penny stock actually had a real tangible working relationship with a major mining company.  This fundamental fact makes this a unique situation.

There have been other penny stocks in the past that have had a lot of speculation of being associated with a much larger mining company, but that was only pipe dreams and speculation.   In this case it appears to be real and meaty enough that you can sink your teeth into it.

So yes, I focus on technical analysis of penny stocks here, but that does not mean that one should give some consideration to outside fundamental developments that may be ‘game changers’.  Most penny stocks don’t get good breaks like the one LBSR has right now.  Their potential massive resources in the ground, a rising gold and uranium price in September 2010, make for a possible perfect storm for this penny mining stock…

More developments to be posted as warranted…

There is a candlestick pattern known as three white soldiers which basically shows three strong bullish candlesticks in a row with the open of each candlestick into the previous days candlestick.

We don’t quite fit that pattern yet, but there seem to be some similarities.  The last two candlesticks look very similar in that they are full demand candlestick bars with very small bottoming tails if any and also no topping tails either.  This is about as bullish as the doctor can possibly order.

The icing on the cake for LBSR would be for another candlestick tomorrow that looks similar to the last two days.  It would be about as perfect a breakout in any penny stock I have ever seen.

The strength in LBSR seems to indicate that it will travel a bit higher before peaking and then establish a new base at higher levels.

I should mention that the .03 resistance is now strong support.  I should also mention that it is very common for any stock (does not just have to be penny stocks) to retest the breakout area which in this case is .03. In other words, if LBSR were to break down tomorrow and then get a big sell off going it would be perfectly normal for it to travel down to .03 again as a test of support.

In this case I do not believe we will do that because of the unusual indicated strength of recent days.  Instead I think LBSR will just form a higher base and leave .03 in the dust.

A move back down to .03 would however provide a good chance for accumulation again as long as it holds as support.  But again I do not expect us to go anywhere near .03 in the next days.

Clearly at some point LBSR is going to enter into a new consolidation again.  I really cannot predict at what price this may being from.  It could start from .06 or .07 or even higher.  It is just one of those things we have to let the stock tell us what it wants to do.  The signs will be obvious in the form of an intra day reversal or a double top on the intra day basis.

I think we have maybe another 1 or 2 days to go higher with the outside chance we gap up tomorrow in a one day blow off.  It is all about energy build up and release.  These penny stocks are no different than any other stocks.  They build cause, and then breakout, and then start the cycle all over again.

I have been thinking a bit more about the micro cap gold copper and uranium exploration company LBSR or Liberty Star Uranium & Metals Corp over the last several days and  have come to the conclusion that LBSR deserves more ongoing coverage in the days and weeks ahead.

There are several reasons for this which I will try to outline below. 

Occasionally there will develop important themes in the market or in any individual stock.  I suppose another way of saying this is that certain sectors in the penny stock arena have very unique characteristics unlike other sectors that can dramatically affect the price in different ways.

Liberty Star Uranium & Metals Corp is an exploration company penny stock in the precious metals sector.  Over the course of the last 10 or so years I can tell you that I have witnessed and also participated in some of the wildest penny stock runs imaginable.  I cannot say that every big run I have seen or participated in has been a penny mining stock, but a lot of them have.  Some of the most sustainable longer term runs have been in the micro cap mining penny stocks.  But why?

I think part of the reason is the unique leverage aspect of any penny mining stock.  You can have a seemingly worthless company based on their share price, but based on undiscovered aspects of their mining claims, they could be sitting on a mega million dollar bed of precious metals.  Most if not all of these micro cap mining companies are already struggling financially so there is no surprise there.  So the key is for them to be able to somehow validate the rocks they have sitting under the ground for which they have claim to.

Once that process begins and shows some signs of real momentum it can have a dramatic effect on the share price.  The number of micro cap penny mining stocks that actually ‘graduate’ to full fledged mining companies is probably only 1 in a 1000 or maybe even 1 in 100,000 ( I really do not know, I am guessing).  This however does not mean that a penny mining stock cannot have a huge run based on ‘hope’ that it will become legitimate.

So that is what I believe happens most of the time.  Hope plays a big part of it and one has to know when to run for the exits.  Of course not all mining stocks are going to make huge runs just because they are mining stocks.  Probably many or most of them will never make that big run.  It is only the few carefully selected hand picked ones that have all the right stuff in terms of their stock price chart and overall technical analysis (very important) and their ‘story’.  Some of them are lucky to have both, a good story and good technicals.

The Gold Price and Other Metal Prices

The main precious metals that relate to big penny stock moves are gold, silver, copper and even uranium.  The prices of these commodities can sometimes be very relevant to the overall moves in a penny stock.  They can help to amplify a current penny mining stock run or start a brand new run in a previously ‘dead’ penny miner.

The backdrop of a very strong rallying commodity price can be very helpful to the appetite investors and traders have for the tiny miners.

I recently did a post on a possible major top in the gold price and also a post on the possible new bull market in the uranium price.  I have since change my tune a little bit about the top in the gold market as it is currently acting somewhat better.  It will be very key to watch the gold price closely as we move into September 2010 because this is the strongest seasonal month for the gold price.  If gold can get a nice move into the end of August 2010 and really catch fire in September 2010 it may initiate a very strong new move higher which could be a very key speculative element for all gold mining stocks of all levels.

If a new mania type run develops in the gold price it could present a very nice backdrop for most mining stocks including the penny stocks.

Technical Analysis of Mining Penny Stocks

The technical analysis picture of a penny mining stock is as important or more important than where the actual commodity price currently trades at.  The mining penny stocks that have nice long bases and massive volume showing interest and demand are cream of the crop.

I am still studying the chart of Liberty Star Uranium & Metals Corp but I believe it has all the right stuff as of this posting.  It has a long base, and a very nice second strong move off of that base that also tested a previous shelf on dramatically higher volume.  This is a very good sign.

On Going Coverage of LBSR

So my basic point of this post is to say that I believe LBSR has all the right stuff and in the coming days and weeks I will try to analyze the moves that are of significance.  As long as it keeps ‘behaving’ I am going to keep covering it.  But when I feel that it has busted the bullish outlook I am going to have to pull the plug on it.

As I start to post somewhat more here at penny stocks penny stocks I am thinking that the best approach to penny stock coverage is to find a few diamonds in the rough if at all possible and then try to provide more close coverage of them until they either validate my outlook, or cancel it and break down, at which point I would of course stop my coverage.

A lot of penny stock sites out there throw a bunch of symbols at you every day without going into much depth as to why or where or what is going on with each particular penny stock.

I try to take a different approach.  I like to try to go into more detail into the penny stocks that DESERVE more attention based on what I consider to be better than average bullish parameters.

Still, the key is to be flexible as possible.  Sometimes there are 1 to 5 day trades out here in penny land.  And honestly I have to tell you that the big time best penny stock setups, the ones that move 500 to 1000% do not happen that often in a given year.  Maybe there will be 5 to 10 of them in any given year.  I could be wrong about this, but that is my sense looking at this sector over the years.

So I am going to do my best to find the biggest possible setups but it is going to take a lot of patience and perseverance.  It should be an interesting journey.  I will change my approach to writing about penny stocks as appropriate.

I should say also to be prepared for dramatic changes in opinion.  This is just the nature of the business.  A stock can behave very well for 40 days.  But if it does something on the 41st day that severely violates what I consider to be a valid uptrend, then I would have to shift my stance very quickly. 

Keep your head up!

Lets work on this together and make the best of it…

KAT Exploration, Inc. is possibly setting up for a very important breakout above the recent trading range.  I was looking at KATX very critically over recent weeks and wanted to be sure that it would not break below 5.5 cents.  It has not broken this support and is an internal sign of strength.

The overall structure of KAT Exploration, Inc. is looking quite bullish and I am upgrading the penny stock rating on KATX to a 1 (our highest rating level). Why?

Well because KATX has now shown us that it is unwilling to break down below 5.5 cents and it wants to maintain the current strong longer term trading range and is now at the top of the trading range for the THIRD TIME.

Usually a stock or index will succeed on its third attempt at breakout out.  Usually, not always. But I like the recent three day move and I also like today’s intra day reversal.  The candlestick looks great.

It is also nice to see KATX performing so well given the recent overall market weakness and the general sloppy trading and weakness in the gold price.  This is a very good sign.

KAT Exploration, Inc meets most of the criteria I look for in a superb penny stock trading setup.  It reminds me of the setup that Sarissa Resources had over a year ago.

I like the fact that KATX has a lot of SIDEWAYS CAUSE and has not broken down.  KATX is a great example of the type of penny stock we like to identify here!  If you ever see a penny stock with a similar setup to this one please do tell us about it so we can share it with our readers!

If KATX is able to hold and maintain a full price candlestick above .092 (possibly next week ?) then it has a clear path to about .17 cents.  There is almost no resistance all the way up to that point and it could be reached in short order.

Certainly a huge gold price breakout would help things along as well, but for now KAT Exploration, Inc seems to be doing quite well on its own too.

According to bloomberg.com KATX currently has a market cap near the 37 million dollar range.  This is a bit of a concern as it become increasingly rare to see ANY penny stock trade above a 100 million dollar market cap.

Assuming KATX is able to successfully trade to the .17 range, then the next level of resistance is the .45 range. 

For KATX to get to .45 range it is going to have to once again form another sideways base of many months duration.

If things get wild enough in the gold market and the gold price is able to get a super spike going then I think it could be reasonable to see KATX eventually reach the above mentioned targets.  A lot of the next moves do depend on the gold price in my opinion!

You might notice that I have not even mentioned any fundamentals about this penny stock.  The only thing I need to know is that it is a gold stock and that the gold market so far is still in  bullish stance.  The chart itself right now is speaking enough to me that it is all I really need to know for now.

The strength of KAT Exploration stock in the last few days despite overall market weakness is a great example of how many times you will see penny stocks trade completely independent of other market indices.  It is almost unbelievable how they do it.  But in a certain sense they become safe havens to the rest of the market.  But for this to happen the stock must have some very strong hands, a very good story and some committed shareholders.

KAT Exploration, Inc the gold mining penny stock that has been range bound for quote some time now today had what I consider to be a possible key reversal for the stock near the .06 level.

KATX has been range bound for a while and what I am so far please to see is the the stock has NOT violated the .05 level on the downside.  This is very important and a key consideration for this penny stock in my opinion.

Why?

Because breaking down below .05 would show that sellers have enough strength to break the recent trading range and destroy the changes of a continuation uptrend.

Today was a key reversal in terms of the daily candlestick and could be a sign that KATX wants now to trade back to the top of the recent range which would be the .09 level.  That is the most important near term consideration for this penny stock.  If it can get to .09 again then it may have a chance for a successful breakout above the .09 level because usually stocks succeed on their breakout attempts with the third try.

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KATX or Kat Exploration looks like a nicely performing stock chart.  It has had an unbelievable run since .005 and amazingly could possible run even higher as long as key support levels are not violated.

It is all too rare to see a penny stock perform in a clean fashion with a clear uptrend like some big board stocks.  And yet KATX seems to be doing just that.

The condition right now is for KATX to continue to get nice price reactions and support off of the .05 level.  If KATX can maintain its composure above .05 and then eventually get above .07 again, it could be ready for another big run.

It is also interesting that the gold price at this point still looks constructive.  As far as the GLD ETF I am waiting and looking for full price bar action above the 114 level for gold to get another massive up leg going.  It really needs to get above those levels for confirmation of new uptrend.

If that happens, then we could be setting up for another parabolic type move in the gold price and that could potentially help KATX to get another leg higher going.

But for now, first things first.  KATX must hold .05 and perhaps build a bit more sideways cause.  Lets see how well it behaves in the weeks ahead…