-- Posted Sunday, 13 July 2003 | Digg This Article
As Caledonia appears to be preparing for another substantial advance, it’s time to write about it again.
To gain an overall perspective, we will start by looking at a long-term chart going back ten years. On this chart several things are obvious; this stock has huge upside potential and is still trading at a rock bottom price, historically speaking. That said, we have to take into account the fact that the number of shares in issue in Caledonia has grown very significantly over this period, this means that, particularly in current trading conditions, it will need a lot more buying power to drive the price up than was the case in the past. However, in circumstances in which there is a “sellers strike”, as when it is glaringly obvious that gold stocks are going to go much higher, even to persons who are somewhat mentally challenged, then it doesn’t matter how many shares are in issue, it will go up, and go up fast. I view such market conditions in gold shares as inevitable and they will be glorious times for those who were wise enough to accumulate the good stocks beforehand. Also on this long-term chart we can see the price gradually rising up out of a shallow saucer base of over 5 years duration; such a long base can support a massive advance. We can also observe that volume has become very heavy over the past couple of years, particularly on advances, a most propitious indication.
We will move on now to look at the 2-year chart, which shows the bull market in Caledonia to date. Here we see two large impulse waves – advances in the direction of the primary trend - followed by reactions. The first wave features an obvious Elliott wave sequence, which I’ve shown, the second one doesn’t, so I haven’t bothered to show it. Notice also the very positive volume pattern, with heavy volume on advances, tailing off on declines.
On now to the 1-year chart, to attempt to determine what we can expect in the time ahead of us. Here we see the reaction from the peak attained last January tracing a parabolic curve. The breakout of a couple of weeks ago signalled that the low point is past and that we are on our way up again. I observed this breakout but did not write about it, because I figured that by the time anyone got to read it the stock would be overbought and about to react back again, a reaction being rendered virtually inevitable by the fact that the price had run ahead of the 50-day moving average and this average was still significantly below the 200-day moving average – it needs to cross it before we can really get moving – which it will shortly do. In addition the parabolic uptrend is only just turning up again. This parabolic bowl is a most useful technical indicator, for it gives us an idea of how the new uptrend should develop, both in terms of time and price, it can also be used to time purchases – the stock can be bought whenever it approaches this parabolic trendline, and, should a significant break of this parabola occur (>3% below it), the stock can be ditched. Traders can also sell the stock if it runs too far away from the bowl, buying it back when it returns to it. In a article about Vista Gold last week, I said I thought there was a 70% chance it would go up, with a 30% chance it would go down. I know some people thought I was fence sitting, but with this one I am more definite, I think there is a 90 % chance that Caledonia is going up, and the nice thing is, if it does break the parabolic uptrend you can simply ditch it – at the current price that means a terrific risk-reward ratio.
I believe we are seeing a lovely little buy spot right now, the price has reacted back significantly, to the now rising 50-day moving average, following the breakout several weeks ago, and we will likely soon see a golden cross – the 50-day moving average rising up through the 200, with the latter close to turning up.
Although Caledonia is not in “poll position”, rising out of a long base and already making, or close to making new highs, as are Golden Star and Miramar, it is clearly revving up and the tyres are warm, and it should prove to be a racy little number, a nice little earner, especially when, some way down the track, I admit, very few investors are inclined to sell gold stocks.
Caledonia Mining Corp., CALVF on OTC BB on (CAL.TO on TSE)
Closed at $0.19 on 11th July 2003
Disclaimer: The author of this article does not own any shares in Caledonia Mining Corp.
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, 12 th July 2003
-- Posted Sunday, 13 July 2003 | Digg This Article
