-- Posted Sunday, 22 June 2003 | Digg This Article
I have remained consistently bullish of Bema Gold for nearly a year, despite its having remained in a long, boring consolidation pattern for over a year. At first I viewed the consolidation/reaction pattern as a falling wedge, but it later became clear that it was evolving into a three-arc fan correction. What’s good about these patterns is that when the price breaks above the third fan line, you can be pretty sure you’re on to a winner. For those who haven’t already spotted it, the good news is that Bema is on the point of breaking out right now, and as we have already had breakouts in Caledonia, the HUI index, Nevsun and Newmont, to name just a few, over the past week or so, I take it as a good indication that a breakout in Bema is imminent.
The consolidation of the past year may also be viewed as the handle of a very large “pan and handle” formation, and so this stock will obviously appeal to the panhandlers amongst my readership. This rare and very bullish formation is visible on the long-term chart shown below.
I also find it very bullish that, due to its boring behaviour for the past year, Bema is about as popular with investors as snow in July. Here is what an astute reader (thanks John) wrote me only yesterday: “Almost all the BGO players on the very nice, actually, AOL Message Board of the past 2 years have deserted. Those remaining have been complaining about no ACTION in BGO for months; or bearish!; or have shifted to WHT because Richard Russell recommended it, JUST in time for it to STOP going up, while the BGO which they turned their backs on has soared, of course! Twas ever thus!” Well, I don’t myself call a move from $1.05 to $1.30 soaring, this is yet to come, which is why I am writing this. But this is typical market behaviour – get almost everyone to throw in the towel and then the thing goes roaring up. Sadly, most of the people my reader writes about, will likely not be aware of how close we are to a breakout from the three-arc fan / pan and handle formation, and will see the latest rise last week as just another blip to be followed by another decline and will watch with surprise and dismay and as it takes off. I’m not saying it definitely will break out shortly, because nothing’s certain in this business, but I consider it a high probability. Even if it falls back into pattern, it should only be a matter of time before it does take off.
As someone who is always trying to keep the big picture in mind, I am accustomed to looking at long-term charts, and when it comes to things like massively powerful breakouts, I have a memory like an elephant. A massively powerful breakout is precisely what we had in Bema in the spring of last year. This breakout put on notice all those who understood its implications that this stock is going to be big. The long consolidation of the past year has served to shake out the weak and the impatient. If a breakout now occurs in the coming days/weeks, from the three-arc fan correction, I believe it will usher in a steep and substantial intermediate uptrend within what should turn out to be a major accelerating long-term uptrend.
Code BGO on AMEX
Closed at $1.30 on 20th June 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, 22nd June 2003
-- Posted Sunday, 22 June 2003 | Digg This Article
