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.

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.

One day’s action certainly does not guarantee an upside move will happen going forward.  I am just saying that preliminary indications are that this could be the case.  Patience and diligence is necessary to observe how KAT Exploration Inc behaves in the days ahead.

The overall structure of this penny stock chart is quite constructive because it is exhibiting a solid ‘stair step’ pattern and so far at least continuing to hold key support levels.

I am giving KATX a penny stock rating of 2 for now but I will probably upgrade it to a 1 rating if KATX can start showing a sign of strength higher.

If however KATX fails in getting an upside move going soon, then the technical picture and rating would drop considerably.

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…

So I am not quite sure how I will go about posting new content on pennystockspennystocks dot com yet.  Perhaps I will post penny stocks that fall in the ‘watching category’ which will probably be about 99% of them and then once in a while I will post penny stocks that move into the ‘high alert’ category.

The fact is that most penny stocks and penny stocks setups are horrible.  But perhaps one tenth of a percent of the penny stocks out there at any given time are SUPERB setups.  And the superb setups do not come around that often.  Image if you could jump into just 4 or 5 total penny stock setups for the WHOLE YEAR and each of them were huge runners.  Wouldn’t you rather do that instead of throwing good money after 100’s of bad?

PGCR Placer gold corp which I previously profiled on this site some time ago was one of those superb setups.  It had a BEAUTIFUL technical analysis backdrop which I described clearly in those posts.  It was extremely powerful.  The best penny stock setups have clear parameters which make them superb candidates for big runs and sometimes sustained runs.

I don’t claim to be able to always pick the most perfect penny stock winners on any given day week or month, but I do claim to have a good ability to really FILTER out the junk setups from the true pearls.

Regardless, it is a constant learning process comparing past moves, time frames, chart patterns, volume, overall price behavior, fundamental backdrop and a bunch of other factors all combined into one.

Sometimes you will find a certain sector of penny stocks doing a lot better than other sectors for a 1 to 3 month period of time.  This can be due to many different reasons but is usually related to how hot things are in the more mainstream sectors of the stock market.

Sometimes we have seen big cap, and mid cap biotech stocks extremely strong on the major exchanges.  That type of action can lead to a biotech penny stock surge.  Another example is oil and gold.  When the price of oil was zooming up to $150, it created a feverish pitch for many oil stocks and then eventually oil penny stocks.

But now we have a new fever developing and it is called gold fever.  The gold price is moving from orderly price advance to parabolic advance.  The mainstream gold stocks are JUST STARTING their moves.

But still, even now we are already seeing penny gold stocks get some running legs.  Recently we saw BRYN and KATX do some huge huge moves up.

But now CVRG seems to want to get a run going as well.  They just came out with a PR afterhours on 11/18/2009.  The structure of the chart is quite promising because it has saucer bottom possible formation and a previous super spike high of .445 cents.  That swing high was on blowout volume and it is wide open because it was never tested.  It could mean a run back up to that level by end of this year or early next year.

It is very hard to predict how far or strong any penny stock will run.  PGCR had a blowout type run north of .02 and the run basically only last a few days.  But I would say that the penny stock runs that start slow and orderly and build gradual momentum have a much better chance of a more sustained run and higher run.  This may be the case with CVRG and especially with a cooperating gold price into the end of the year.

My forecast for the gold price is for 6 to 9 months of price appreciation that could put it in the 1400 to 1800 range.  We are only roughly 3 months into the gold price advance so far, so I think we have a good 4 to 6 months more ahead.  The current price advance in gold is a massive upside breakout from some much much larger patterns and that is why I think those that do not focus on the larger patterns will be confused as to how gold can sustain such a long and persistent run in the months ahead.

Anyway a 38% fibonnaci retracement from the .445 highs to the recent lows would set a target price of .18.   So it would seem that could be a minimum target. 

Again, I like the long saucer type bottom formation.  We also have a weekly MACD cross that just occurred.  On balance volume and accumulation distribution both look very bullish to me.  The 50 day moving average is making a stance for a golden crossover with the 200 day perhaps within a week or two.

So all the above points mentioned tell me a new mini bull market is starting in CVRG…

The penny stock Placer Gold Corp (PGCR) which trades on the pinksheets forms a chart that is worth studying in my opinion.  The chart you see above (click on it to make it full size) is a longer term 2 year daily price chart of PGCR. 

It is worth studying because in my opinion there are some well defined parameters that make for clear cost benefit analysis.  Many penny stock charts that I look at are not so clear.  Typically there is a lot of congestion, noise, lack of price data, and just general confusion in the price chart. Or the price movement has wide swings all over the place and it is difficult to define clear trends or parameters that are worth acting on.

Reason 1

But with PGCR I want to tell you about a few important observations I have made.  For starters, I see long term support at the .002 level.  The .002 level is a significant level and a level that PGCR must hold in order for me to remain open to bullish possibilities.

It was touched 3 separate times in 2008 in what looks like a well defined triple bottom.  After that triple bottom, PGCR was able to get a rally going from .004 to .11 cents in about 1 months time.  That was clearly a huge sign of strength rally that came off of the triple bottom.

Since that time PGCR has drifted down in a seemingly endless price decay back down to the current time frame of August 2009.  But price so far has held above .002 .  I can tell you that I like how price has slowly retraced back down to the support of the triple bottom range.  I have seen this happen before in several other penny stocks and it has the potential to result in a huge snap back reaction rally to the upside. 

The most memorable penny stock that I can remember doing this last was INBG.  It went from .004 to .30 cents in a few days.  But the float was very very tiny on INBG, but still the pattern was similar.  A long slow retest of a previous congestion area.

So clearly .002 is a key level for PGCR.  For me to remain bullish on the longer term time frames, the .002 level must hold.  Another encouraging sign on the recent test of .002 is that we have seen to very large volume spikes (not shown on the chart) off of this level.  I am reading them as accumulation and support off of the bottom of .002.  To me they are an encouraging sign, although admittedly shorter term signs.

Another positive is that the previous mega rally occurred in the December 2008 time frame.  We are coming up on December 2009 in a few months.  It is not a huge point but I have noticed on some occasions that you will sometimes find pattern seasonality trades in certain penny stocks.  PGCR may fall into this category come December 2009.  The other positive about this mega rally is that in general, I like to see penny stocks show me in ADVANCE what they are capable of doing.  It is better for me to see that a penny stock already had a previous super strong rally as an indication that it may happen again.  It is not so favorable to see a penny stock that for the past few years was never really able to get any kind of super strong rally going.

Reason 2

But PGCR is a gold penny stock.  And that is the wild card that could either accelerate this overall pattern in PGCR or change it to something less favorable.  The gold price is trying to get a breakout going now, but it is at the point where it needs to do something soon, otherwise the whole breakout scenario could be in doubt.  I recently wrote a post on a different site that defines some of the near term parameters on the gold price. 

If the gold price can manage to get a breakout going, I would view that as highly favorable for a PGCR renewed upside run.  It may take a while to develop but there is a lot to be said for a massive breakout in the gold price affecting positive sentiment on almost all gold stocks, including the pennies.  The problem is I cannot say for sure if we will get a mega breakout in gold or not by September.  If we do get a mega breakout in the gold price by end of September 2009, then PGCR merits very close watching in my opinion.

There have been examples of previous gold price spikes ( for example the one in 2006) that have caused gold penny stocks to go ballistic to the upside.  I remember there was a bankrupt gold penny stock that was trading at .0001 and it shot up to .15 cents in about 10 trading days.  That occurred during the most bullish up phase of the gold price spike. 

So there are a lot of ‘ifs’ in my comments above.  But they are big ifs and if activated could create a very bullish scenario for PGCR.

Reason 3

As long as PGCR can hold and maintain .002 level then I think there is merit for accumulation for an eventual upside return to 11 cents.

The reason why I am saying 11 cents is because of a simple principle of stock price movement (all stocks, not just penny stocks).  If price fails to take out the previous highs, then it will try to take out the previous lows.  If price then fails to take out the previous lows, then it will try to take out the previous highs.  Rinse wash and repeat.. That is the process of price movement.

PGCR did a triple bottom onto .002 in 2008 and it failed to take out the previous lows.  Then it got a super mega rally into .11 and failed to take out the previous highs.  Then it drifted down to where we are now and I do not know yet if it will be able to take out the previous lows of .002.  BUT IF IT CANNOT then it says to me we will see an eventual run back to .11 to try to take out the previous highs again.

PGCR getting above .0045 is the First Guidepost

If PGCR can get a close above .0045, then it would be in my opinion a first guidepost telling us that a new uptrend can begin.  It might not be a bad idea to set a price notification email alert on PGCR over at CBS Marketwatch or your other favorite stock price alert service.  I would simply set it to trigger an email notification upon a northward break of the .0045 level.

In my opinion that would be a powerful sign that we could see the beginning of a resumed run to .11

I have watched the intra day action on Level II for PGCR and I can tell you based on my observations that the penny stock trades very thin and it can be difficult to acquire a position.  This is both good and bad.  It is good in the sense that when and if real upside volume comes in there is the potential for swift price movement.  It is bad in the sense that it is hard to get a favorable price and can make for difficult risk management.

So in summary, a cooperating bullish gold price, a hold of support at .002 and a price thrust up and over .0045 could all be the ‘perfect storm’ that launches PGCR into another attack on 11 cents.

I did a post a while back about UNCO and was exploring the possibility that UNCO may be coming into a buy point.

Well now we have some hindsight and clearly it can be said that UNCO never activated a REAL buy point as a signal to go long and stay long.

Why am I mentioning this?  Because I was browsing quite a few message boards and all along this decline it seemed there were quite a few that were jumping in UNCO during this waterfall like decline.  The chart to the left does not show most current prices.  But right now as I write this UNCO is trading near .008 and has gone sub penny again.  The decline has clearly been relentless since the very large sign of strength rallies we saw in late May.

So What is the Lesson here if any?

The ‘lesson’ if you will is that UNCO NEVER clearly activated a buy point during this long retracement phase.  A buy point would have been a price closing with good volume above that pink colored down trendline.  But UNCO was never able to accomplish that and gave no reason for traders to go long.  I am calling this a ‘lesson’ because what I have found is that even in pinksheet and otcbb penny stocks, one can still manage risk and use buy triggers like you would on any other type of stock.

It is a false myth that technical analysis does not work on OTCBB and pinksheet penny stocks. I disagree completely.  That is not to say that applying technical analysis can be somewhat challenging on these types of stocks sometimes.  It can be.  Sometimes the charts are very spotty in terms of volume and the signals can be very hard to read without careful enough analysis.

If UNCO really was to be a strong momentum stock then around June 8th to 15th it should have held more sideways price action and accomplished a breakout above the downtrend resistance line. But it did not do that, so it was time to look elsewhere.

These stocks that do these slow tiny declines day after day can be very deceiving.  They seem to call out to us to buy them, and their slow daily decline does not cause too much alarm.  But they are still dangerous and again, they need to show us a CONFIDENT signal (ie. breaking out above the pink down trendline) before they warrant taking any kind of trading risk for a long position.

On the popular message boards there is some talk about how this company is a total scam and that the management has time and time again ‘duped’ investors with a dog and pony show only to come up empty with any real results. According to these burned investors, Unico goes through this cycle of pumping up a stock maybe doing some insider buying and then not delivering anything of substantial value in the way of gold production or real concrete progress on their deer trail mine.

If I had a penny for every time I heard the story about how such and such penny stock is a scam, then I would be a very …… (you fill in the blank).

Look, I just do not know if UNCO is just another penny gold mining company that is big on promises but short on results.  That is, I do not know from the fundamental side if that is the case.

But what I do know from the UNCO charting side is that right now we have a fairly good scenario whereby the price of UNCO is at a key decision point and traders and investors have to decide if we have the real deal here or just smoke and mirrors.

The chart is the only thing that matters to me here. I cannot worry about all the other gossip about whether or not they are doing legit business practices and whether or not they will start producing gold in July 2009.

The price chart as you can see in the chart above is at a key juncture and I am going to be watching it very closely tomorrow morning.

If UNCO by the end of the day tomorrow or the other two days of this week is able to get a closing price above that white down trend line shown in the chart above then it could trigger an elliott wave 3 up or new rally in this stock.

On the other hand, if UNCO is not able to achieve that and breaks below .015, then it would invalidate the bullish case, at least temporarily (it could be a false downside shakeout) and open the door to more weakness in price.

So lets let the price decide here what the verdict is. I will be watching this one closely tomorrow and the rest of this week to see if we have any potential here.