Happy New Year everybody

I am winding down for the weekend, but wanted to tell you how I am positioned going into next week.

The last of my Mawson shares are bought, my Feb AGQ calls have triggered (buy stop), and am keeping my MCP, REE, AAPL, and CMG shorts (via Feb Puts).


Fully invested in gold, silver, and uranium positions.

I'll post a bunch of charts on Sunday, be safe.

Bob

Dollar Fail?

If the dollar stays below this line, it indicates to me a fail and my trade is to get longer hard assets.

Minera Andes - Ready to Breakout

Mineras is a very successful gold and silver miner, with a huge copper find.  This company is also 33% owned by a legend in the mining business.  That kind of ownership aligns well with outside investors.  Read his profile below.

Rob McEwen is the company's CEO and largest shareholder (33% ownership), he is also the founder and former Chairman and CEO of Goldcorp Inc. (NYSE:GG TSX:G). While Rob managed Goldcorp the stock had a compound annual growth rate of 31.26% and the company grew from a market capitalization of $50 million to over $10 billion. Rob believes that management should be as personally invested in a company as its shareholders, and as such owns a large percentage of any company he manages.

MNEAF is ready to break out, I'll wait for confirmation and buy on the breakout.

Timberline - A Great Value

Timberline Resources is a Nevada based miner that has revenue of $17 million on a $57 million market capilization.  They expect to start producing 60,000 ounces of gold in 2012.  I have a buy order at $1.13.

I like this company for following reasons;

• U.S. based miner
• Located in the very productive Nevada gold belt.
• Market cap to gold production is low. (60,000 X $1,400 = $84 million in revenue/$54 million market cap)
• Expecting some additional positive PEA this spring.

My Strategic trading plan 2011

On my second to last post I shared my worldview on my best guess regarding 2011, and am positioned accordingly.  I will share more details in a moment, but want to make a point about planning.  I spent more than half of my corporate career as an executive in the technology space focusing on strategic planning / new products and acquisitions.  In that role we always worked from the future (as we best divined it) back to the present and determined our gaps, hence our plan was formed (getting from here to there).  It is no different in speculating with equities, and regardless of what anyone says, people trade with a bias, so the more informed you are, with a structure for your entries, and discipline for when you are wrong, you will do well over time.  Your plan must also be true to who you are, risk wise, time able to spend, capital available, etc.  I have a niche that I spend a lot of time researching, and a style that works for me.

Tactically, my buy themes are silver, uranium and natural gas; my view is these sectors are operating under fundamentals that are less sensitive to economics and currency games.  Silver is a supply/demand imbalance, Uranium is an inelastic buy cycle for the reactors, and natural gas is a value play.  An area where I will spend capital and time on is in the grain markets, (climate issues).

Where I am at the moment is a full commitment to Uranium, save for a buy stop on the balance of my Mawson position, I am accumulating Natural gas through MLP ETF's (three of them) monthly or when its RSI fall below 30, I have a core gold miner and silver miner position and will add to and sell based on my trade signals.  I also sell calls against more core positions when I see short term overvaluation/reversals and sell put spreads when the reverse is true.

I will short primarily through the large cap high beta names when I feel they are overvalued (currently short CMG).  I will sell any position if I lose faith in the company or my thesis.

My expectation is to nearly double my capital in 2011, (80%).  This is against a good size portfolio, a portfolio we live on.

I'd love to hear others' plans.

Risk on / Risk off

People ask me all the time if the U.S. is in such bad shape and things get worse, why will the dollar and gold do well.  I then whip out this chart and explain to them that as things get bad people need to sell things that are electronically invented and / or are leveraged and buy something that has less debt or leverage associated with it, or in the case of gold no debt associated with it.
To illustrate how much debt worldwide is out there against real capital, look at the following chart.


The annotations are mine from government websites.  There is approximately $5 trillion in cash and gold supporting $290 Trillion in assets.  That is some nasty leverage.  The world governments are trying to add $2 trillion in capital to the foundation.  This is grossly inadequate.  The world's asset base simply declines by 3% and we are insolvent again.
As anyone who owns a business or truly invests in capital assets, you value these assets on the discounted income they generate, and as government spending takes over private spending to increase this capital base, it is inefficient and slows velocity that can generate income, and increasing taxation does the same.  So bottom line, the income supporting these assets are suspect and after a next flirt with high inflation we collapse into a debt destruction spiral.  Happy New Year.

Can China and India grow without Killing its people

Read these excerpts from today's news.  These are two very poor countries that are highly susceptible to  food inflation, and because the only reason their economies are thriving is wage arbritage, higher incomes are out of the question, this ends badly.  Please read below.

In the year to Dec. 11, India's food price index rose 12.13 percent, with the price of onions -- the country's most widely-eaten vegetable -- of especial concern, while the fuel price index climbed 10.74 percent. This compared with 9.46 percent and 10.67 percent respectively in the previous week.

“I dare not sell them,” the middle-aged fruit hawker said, explaining the absence of the popular “mandarin” tangerines from his cart. At eight yuan per half kilogram in the wholesale market, there was no point in him purchasing the oranges, Mr. Liang said, because no one would pay more than that for the fruit. “Everything is getting too expensive. … If this goes on, I'm afraid that people who earn 3,000 or 4,000 yuan ($607) a month soon won’t be able to buy fruit.

A 10.1-per-cent jump in food prices last month drove overall inflation to 4.4 per cent in October, the highest level in 25 months and well over the government’s annual target of 3 per cent.

With the nation's consumer inflation surging to 5.1 percent in November, the government is set to place greater emphasis on price stability next year. Banking industry insiders and economists are expecting a lower lending target for 2011, after many blamed the unprecedented credit lending of the past two years for pushing up prices.
Guo said he expects China's economy to grow 8 to 9 percent next year and credit growth will slow to 13 to 14 percent, compared with 19 percent this year.

The rising cost of food has sparked grumbling in the grocery aisles and growing concern among those who govern China’s 1.3 billion people. With most families spending half their income on food, the ruling Communist Party has long kept a close watch on food prices, viewing them as a possible trigger for unrest.
Others are less sanguine. Tsinghua University School of Economics and Management professor Patrick Chovanec says China is still dealing with the inflationary impact of 50-plus percent growth in money supply since the stimulus's launch, and will have trouble tightening up, Party pronouncements notwithstanding.
The abundance of cheap money has already driven up prices in assets such as luxury apartments, jade jewelry, and Chinese art. "Now this inflationary pressure is leaking out into the general economy," says Chovanec. He points out that the likely loan target for next year, although smaller than that of 2010, would still be over one and a half times the amount lent in 2008. "If anyone is printing money, it is China's central bank, not the U.S.," says Stephen Green, head of research for Greater China at Standard Chartered in Shanghai.

Some Musings

As 2011 unfolds before us, I am thinking hard about my portfolio and how to position myself with the upcoming volatility.  To me, even if the FED is actively buying and adding liquidity to the market, headwinds are already blowing strongly.

China is now playing defense in trying to control a FED induced inflation, which will slow their economy down more than anyone is will to publicly comment.  Their banks are loaded with non performing assets, and their companies are operating on near zero margins.  It will be hard to justify the China is the engine theme.

Europe will have member state defaults, IMNSHO, Ireland will cry uncle and default, Sein Fein is likely to take control of the government in March, and they already are declaring this agreement null and void.  Once this occurs, the British banks are toast, and France and Germany take some sweet haircuts.  Best case scenario is a radical restructure of the current deal to Ireland's favor.  But Ireland is only a catalyst, Spain blows the barn down.  Either way the Euro weakens in 2011.

The BRIC nations, we already spoke about China, Brazil and Russia are commodity countries that have different futures.  Russia will suffer some serious food shortages next year, their wheat belt is already drought stressed, and with this very cold winter, expect the planting season to be late.  This brings frost into play and another failed crop will cause grain prices to spike, devastating Russia, and seriously impacting the ROW.  Brazil is dependent on a healthy China, as well as Australia.  Although I do not follow India that closely, it appears they are having some inflation issues.

Then there is the good ol USA, I already recapped in an earlier post regarding our priced for perfection market, and extreme bullishness, but we have some serious skeletons coming out, and a political environment that is hostile to the devalue and stimulate environment everyone blindly bought into for the past 20 months.

The mortgage crisis will come to a head this year, rising interest rates and judicial proceedings will see to that, this overwhelms any interest income spread the banks enjoy.  California, Illinois, and New York will blow up this year, here in CA the budget deficit is 25% of the entire budget, it takes 2/3 vote to increase taxes, which won't happen, and congress will block any attempt by Obama to subsidize the states like the past two years.  This is a train wreck coming.  The House is dominated by the Republican party with a voter mandate to shut down the spending, and this will dry up any expected uptick from the federal government.  The FED may try for QE 3,4, whatever, but there is a vote pending to raise the debt ceiling, I believe the Repubs will use that leverage to take power away from the FED, and most definitely Obama.

Does this sound like economic recovery to you?

This post is getting long, I will next explain my trading plan for 2011, based on this thesis.

Merry Christmas from Tanzania

TRE is a stock I own for some time (basis under $4.00).  It has been consolidating for the past 3 months, and broke out this week.  Depending on how you like to measure the flag pole, this stock looks likely to run to $9-$11 in short order.

I intend to buy call options on Monday and bolster my position.

This Simply Blows Me Away

Two weeks I posted on record margin interest and how that precedes sharp retracements, now there is a chart that illutrates how leveraged investors are (see chart one), couple this with hitting resistance in the Nasdaq at extreme ratio to its 200, and the SPY at nearly record extreme levels to the 200 (April 10 was higher, remember what happened next), sentiment at extreme levels, mutual fund cash at low levels and the put/call ratio at low levels demands prudence on investors part.

This net worth chart tells me the will be tears as not everyone is going to unwind profitably. 

Noble, Not So Much

I like using the 13 weekly EMA as a bull/bear line, and Noble broke that line and also weakening relative strength.  A head and shoulder is also forming on the daily.  My trade plan is as follows.  I am in with a 36/40 call credit spread for $.40, I am out if NE breaks $35.  If/when the neckline breaks I will place a $30/25 Feb debit put spread, close at the measured move.

CGA breaking out

UEC ready for another push higher

I own UEC and had a buy order to buy more at $5.88.  It hit that, and looks like a good, low risk entry for a new position.  My stop is $5.50.

Energy Stock Breakouts

A chart pattern I always look at is when the lower bands of the 3 month LR intersect with the 6 month, with price.  Below are three stocks that met that criteria, and decided to breakout.  In fact I suggest a look at the entire sector, it looks constructive, near term.

Tournigan - Ideas from a Poster

Last night a poster has been following a stock called Tournigan Energy (TVCFF) and asked my opinion.  I had not followed them but a very good friend who trades the juniors very well shot me some of his thoughts, and was cool with me posting them.

"Their flagship project is in Slovakia.  They have an NI-43101 proven reserve of 38 million lbs. U308 at a very high grade...higher than most every one of their peers.  Slovakia is very pro-nuclear, being the 3rd highest user of nuclear energy in the world on a per capita basis.  They also have huge popular support (over 80%) in favor of nuclear energy.  They won't be producing any time soon, but if all goes well maybe they will be ready to start the permitting process next year or the following year.  But there is no doubt they are undervalued compared to their peers.  The price of their U308 in the ground is .55 Canadian cents/lb., which is dirt cheap compared to other junior explorers who have NI-43101 proven resources this big.  Tournigan also is doing more drilling and will certainly add to their resource base (last time they drilled they added over 5 million lbs.).  Also, these guys were $4.50 back in June of '07 when uranium was all the rage.  It's definitely one worth considering...especially at .27 cents!  That's pretty ridiculous. "

 

A break above the 20 EMA would interest me to take a position.

 

One of the reasons I started to blog was to share and to learn and I appreciate the heads up on this stock and for my friends insight.

 

 

AEM - What Happened?

AEM is my largest position dollar wise, so I watch it very closely.  I expect great things from this company, but was expecting some weakness in gold and the miners short term.  I placed DEC and JAN 85 sold calls on when RSI7 gave me a signal.  What I did not expect was the negative reaction on news that prodution costs were higher than expected, even though they raised gold reserves and quadrupled their dividend.

These things happen, and I was as prudent as I could be on a stock I won't sell.

So where does that leave me? I closed my calls yesterday when it hit the fib line, and feel comfortable that the stock is oversold and at support.  I will rehedge Jan75's on addtional weakness next week, or will buy calls on a RSI7 buy signal.

Mawson is Flagging out

I wrote on Mawson before, it is a dynamite junior uranium Miner.  http://arum-geld-gold.blogspot.com/2010/11/mawson-potential-blockbuster.html.

I just set my trade parameters; a break of the 20 EMA ($1.92) or the break of the flag, $2.10 as of today.  I will adjust these daily.

Two for the Short Watchlist

Here are two stocks that are sitting on their 20 with a retracing RSI.  A break of the 20 should be good for a couple of dollar move.

Swing Low for the Dollar?

The collapse of the long bond must have policy makers very concerned, with the banks not lending, and holding bonds to play the spread for income, marking capital losses on your bonds does not move you forward on your capital ratios.  Plus, with the 10 year backing up you can kiss the mortgage and real estate markets bye-bye, further pressuring the banks.

So what to do?  Well, nothing like a good scare in the equity markets by strengthening the dollar to take some of the pressure off.  Conjecture aside, I am safe in saying the dollar drives all, and the persistent strength is starting to take its toll.  Today it  (the dollar) hit a swing low, as I understand it, and I became even shorter in my portfolio.  Below are some landmarks for me.

I will post some trade ideas after I have a chance to reveiw my charts and filters.

Shorts Update

Below, I posted on a number of short positions I have taken, with ERX this morning being my latest.  They are moving as expected, and wanted to reiterate that this move is just beginning, IMO. I commented in the charts below.  I am also short SPY PKX, PTR, and MCP (not pictured in this post).

As a caution, I am always moving stops to reduce my risks in case I am wrong.  I am only painting the idealized view.

ERX, Gravity per Chance?

It is probably obvious for those who are following that I think we are somewhat stretched in the commodity space.  ERX has had a nice run (chart one), and looking at it a different way, you can see it is stretching its LR for the six month channel.  My play is to short (via puts) in the morning, with the top of the channel as my exit, if wrong.  Due to decay and volatility fear, buying puts is preferable to buying calls on the inverse.  My target is $45-46 area.

I hold a a lot of oil MLP's, and used ERX, DIG and DUG to to hedge my positions.  My oil portfolio barely noticed the 2008 crash using this method.  I also took short positions in PTR (puts) today, and DO (call spread) last week.

Oceaneering International, Trend Change?

A favorite pattern for me to trade is the Three outside down candlestick, a definition, from Leavitt

The Psychology
In an uptrend or within a bounce of a downtrend, a bearish Engulfing pattern forms. By itself this pattern has moderate reliability as a reversal indicator, but when the it is followed by another black day (preferably on strong volume), the overall pattern becomes much more reliable.

The bearish Three Outside Down is a continuation of the bearish Engulfing.

If I can get a good fill I am going to sell a January call spread 75-80 sometime today.

Read Barrons and WSJ this Weekend

For me at least, this weekends Barrons and WSJ opined on many sectors/areas of interest for me; Extreme exuberance, low volatility, rare earths, China's oil and gas industry, solar inverters and wind energy/components.  I have also recently posted my concerns in the area of rare earths, solar energy and China oil and gas, but a new name came up that I have traded in the past, American Superconductor.

American Superconductor relies on one, yes one Chinese supplier for 80% of their revenue.  That company is Sinovel, and in their latest filings they reported production vastly outstripping sales and wind energy farms sitting idle in China because they are not connected to the grid. 

If you are long this stock take heed, but these articles are speaking some larger truths, we have some serious imbalances forming due to the nature of how the Chinese manage their economy and the reliance some companies fortunes are tied to them (MCP, REE, AMSC), and if we build it, they will come mentality that is creating excess inventories in some hot industries that rely on Government largess to grow (PWER).  Power One's margins are twice that of the largest Inverter company SMA, and inverter prices are expected to fall up to 20% next year into the teeth of falling subsidies.  This is hardly a growth story for a growth stock.

Finally, the WSJ noted that margin is at extreme levels ($300 billion) and every time it reaches these levels a significant retracement occurs.  Also of note is the use of leveraged ETF buying on top of the use of margin, that is a recipe for disaster.

Be careful out there.

GOLD - Low Risk Long Trade

Gold just reversed hard at its rising trendline from May, and is sitting under its 78% retrace from its run frm August to its recent highs.  Trade, go long at 89.64, stop at the rising trendline price.

Watching AGQ

The silver metal rally is long in the tooth, and AGQ painted a lower low, if it breaks the 20 this time, I am speculating it retraces to the 50.  The 20 will be my stop, if I am wrong.

SNP Looks Weak

China Petroleum and Chemical Corp., China's state owned oil and chemical company is really struggling, and the chart is showing the pressure.  China's input costs are surging, thanks to their insistence on pegging their currency to ours.  Their reasoning is to maintain export competitiveness with us, alas there is no free lunch however and their raw material prices are soaring, but the Chinese government cannot allow these prices to flow through dollar for dollar (or yuan for yuan) so the margin pressure is building.  I think the chart is reflecting that compression.  It has filled that gap, now awaiting further weakness to enter short.

I want to point out some other weak stocks (no time to place the charts now), SMG, GOD, NEM, and BVN.  However TNH and FTI are looking interesting as long candidates.

POT Up in Smoke?

The Ag Chems, in my opinion are looking tired, and any additional dollar strength will push them lower.  I intend to place a debit calendar put spread on POT, and add to or release my hedged leg upon a break of the black line drawn on my chart.  AGU looks similarly patterned.

NAK Breaking Out

I own a large and profitable position in NAK.  Today it broke out on no discernable news.  I love this company, read below.

"Since acquiring the Pebble Project in 2001, Northern Dynasty has delineated and advanced one of the world's greatest stores of mineral wealth.

Located on American soil in southwest Alaska, the Pebble deposit is remarkable for both its size and composition. Current resource estimate includes 5.94 billion tonnes in the measured and indicated category containing 55 billion lb copper, 66.9 million oz gold and 3.3 billion lb molybdenum; and 4.84 billion tonnes in the inferred category, containing 25.6 billion lb copper, 40.4 million oz gold and 2.3 billion lb molybdenum. Quantities of silver, palladium and rhenium also occur in the deposit."

I am always interested in owning American mineral assets, that is why I own Aurcana, Rebbit, Exeter mines, Uranium Resources, as well.

Watching Posco as a Short

Once Posco broke out of its rising trendline it has formed a series of lower highs and lower lows.  Yesterday it broke below its 50 EMA. I placed it on my watchlist to short when it breaks the 50 again. a break above yesterdays high invalidates my thesis.

Three Short Candidates

A filter I like to use is when the 20EMA falls below the 50.  Today three diverse candidates from my Hard Asset list interest me.  They are; DO, EC, and CSIQ. The 20 is my stop if I am wrong.  For me, I will probably sell call spreads on these, as it is close to OPEX and I have high cash and margin levels from scaling out over the last week.  I will see what the morning brings.

Silver is a Bit Tarnished

Look at AGQ, bearish engulfing pattern, I expect a move down to at least 135.  I bought AGQ Dec 150's and 145's earlier today and 60 Jan SLV 29 puts.

Cocoa, Time for a Sip

On 11/3 I posted on Cocoa, watching for a breakout of the descending trendline going into its January seasonal low (first chart).  Today it broke that trendline with some strength.  I think NIB gives us some defined risk areas to exit, or for those who wish to wait for a pullback, the bottom of that upward channel is a good place.

Aurcana silver

I bought another junior Silver miner on Friday, Aurcana Silver, for the following reasons:

• The mines are located in Mexico and Southwest Texas, mining friendly environs.
• Aurcana is expecting ther production to quadruple to 5 million ounces of silver.
• Sprott Asset Management have just  entered into a debt financing deal with them to complete these projects.
• I like U.S. production, as our mints must buy U.S. production for their coins.

Although, I think silver may take a short pullback here, and this stock has run ahead, the juniors in my opinion will hold their value due to their take out values. 

I intend to buy more on any touch of the 50 EMA.

Shorting MCP and REE

As I posted a month ago on rare earth companies being in a bubble are now playing out.  MCP has just broke the 50 and REE is hovering over it, with both sporting very weak relative strength and accumulation.  These stocks have a long way to fall and I will participate in this decline.

Taking Stock

I want to give everyone an assessment of where I am at, and what positions I am now holding.  The past two months have been a whirlwind, and the gains a bit too easy.  I suspect there is some more upside left in this current impulse higher, but I am taking substantial chips off the table.  I will reference what I am out of below.

NOA
AGQ
SLV
GDX
AUY
CREE

I am still holding PUDA, but am ready to cut it in half as I have nearly a double in it.  I am still keeping all of my junior silver and gold miners, my core gold miner positions, my uranium, coal, MLP's, BWEN and natural gas stocks.  I am now 70/30 equity to cash from 130 equity.

I intend to sell some options into OPEX and do some high beta day trading as opportunities present themselves.

I am still strategically committed nuclear, silver and natural gas as my themes for 2011.

Separating the Wheat from the Chaff

I have been watching the grain markets with great interest since 2008 when we entered into this cyclical cooling period.  As the earth cools it has a great impact on three major grain markets.  Canada, Russia, and Australia.  Russia has suffered a devastating collapse in their wheat harvests due to drought, Australia has gone from extreme drought to excessive rains and disease, and Canada's growing season has compressed due to early winter onset.

Two other macro issues are also in play, grains like all other hard assets are being bought to preserve wealth in the fiat folly policy underway around the world, and increasing middle class members around the world is raising consumption of said grains.  As a result, grain inventory around the world has slipped to 90 days, a 11% decrease over the past year.

So in my view a perfect storm is coming for the grains.

Looking at the chart of JJG, it is ready to reengage its upward channel.  When it broke below the channel the 20 never broke below the 50.  I am a buyer (scale in) as it slips back into that channel.

Personally, we have been stockpiling flour and sugar to give us a cushion, if need be (remember the rice shortage).

Broadwind Energy Taking Wind.

Broadwind energy is a manufacturer and servicer in the wind energy space.  Technically, I like the divergence and with the breakout of the down channel gives me a low risk buy area. $2.30 is my near term target.