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-- Posted Sunday, 12 January 2003 | Digg This Article
We have a most interesting situation developing now in Coeur d’Alene Mines. Being very well acquainted with the concept of opportunity cost, I have been watching this stock for about a year, but have not felt moved to either buy it, or recommend it to other people, as other investments have offered greater profit potential during this period. I have been content to sit and watch other peoples’ capital complete the work of turning the trend in this stock from neutral to up, as the great base formation of over two years’ duration nears completion.
So it is with great pleasure that I am able to announce to readers that the base formation in Coeur d’Alene is now complete, or very nearly so, and we can look forward to a period of very substantial advance before much longer. Unlike the case of Apex Silver Mines, where I deliberately set out to “cause” last Friday’s breakout through the $16 resistance level, because I was almost certain it was ripe for it, here we may still have a few days, or even a few weeks, before the major advance that I anticipate gets underway. I say this because, despite all the flashing green lights, CDE still has to clear the resistance between approximately $2.00 and $2.50. That said, it would certainly be wise for investors who have an interest in this stock to “climb aboard before the train starts to leave the station” for two reasons: the first is that if we are pretty sure this is going up soon, and the current price is $1.96, why wait until it’s $2.50 or higher to buy it? The other reason is that, with gold and silver now looking so explosively bullish, this should, given its current technical condition, pull out of the station like a Japanese bullet train.
It’s virtually impossible to understand what is going on in this stock by reference to a one-year chart alone, it is only when the long-term charts are examined that the game plan manifests itself. This is one of those instances where the further back you go, the clearer it gets, an outstanding example of the saying “to know where you’re going you have to know where you’ve been”, which is very true of many things in life and is one of the main justifications for using charts. So, as they say on a radio station when they’re about to play a Neil Sedaka record, “we’re going to go back, way back…” and start the chart overview with a chart going back to 1973, and progressively zoom in closer, as with a series of satellite photos, so that we always maintain a sense of perspective. Look now at this long-term chart, which immediately reveals that, as a very long-term investment over this period, CDE stank, and, during the roaring general bull market of the 90’s, the opportunity cost of holding this stock was enormous. Throughout most of this almost 30-year period, with the exception of a few years in the 70’s, CDE has only ever performed as a trading counter. The chart also clearly shows the vicious bear market decline in the 90’s and the determined accumulation throughout 2002 (see the high volume at the bottom of the chart), which has put a floor under the stock and prepared it for a new bull market run. Before leaving this chart note the large amount of time the stock spent trading in the $15 - $20 price zone, which is the price zone where we should therefore expect resistance to appear on the way up. The good news is that we have a largely clear run up to $15, which is over 7 times the current price.
Now to consider the medium-term 5-year chart, where we are able to examine the ongoing base formation in more detail. On this chart, the base formation, which has evolved over the past two and a half years, can be seen to be a “saucer formation” with exceptionally bullish volume manifestations. Last summer, the price attempted to break out of the saucer without success, and, although it did not succeed, both price and especially volume action were exceptionally bullish, indicating that a later breakout would be almost inevitable, as Arnie would say “I’ll be back”.
Finally take a look at the shorter-term one-year chart, where we can see that volume action has been positive throughout - strong on advances, tailing off on dips. It seems hard to believe that the price is no higher than it was at the end of May last year, but although the price may not have changed, the technical condition of the stock is vastly improved. A massive amount of stock has rotated from weak to strong hands, the 50 and 200-day moving averages have pulled up much closer to the price and are in bullish sequence, allowing for a substantial advance and the price is nudging the $2.00 level for the sixth time in about seven months. We have a very good price right now, below $2, and the stock is set to mount another assault on the resistance between $2.00 and $2.50 and this time I expect it to take it out, due to a big rise in gold and silver. This breakout from the saucer formation should lead to a vigorous and sustained advance.
I now view this stock as an excellent investment for a wide range of investors. Fund managers should seriously consider stocks of this calibre, which make a great antidote to the malaise that will likely continue to affect a good many other stock sectors as the year wears on. The stock should also be attractive to substantial, wealthy investors as it combines the virtues of very large potential gains with, for this sector, relative security. With a prospective run-up from the current price under $2 to the $15 area, over a perhaps two-year time frame, the stock should also, at times, be of interest to speculators and short-term traders.
Code CDE on NYSE
Closed at $1.96 on 10 January 2003 By Clive Maund, no responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Kaufbeuren, Germany, 12th January 2003
-- Posted Sunday, 12 January 2003 | Digg This Article
Web-Site: CliveMaund.com
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