Weekly Commentary

Vacation time is over and now its back to work. We can't live all the time in paradise, or can we? LOL! It was nice coming back to all your emails and I was pleasantly surprised at how many of you asked to be placed on the list for my Stock Pattern Flash Cards. Looks like I'm going to have to buy more gift wrapping paper and perhaps get a second batch ordered from the print shop. I will have the web site updated this week so you can order them online. For those of you who are wondering what I'm talking about, please refer back to last week's newsletter for a description of the Flash Cards by clicking here and scrolling to the bottom of the newsletter. They make great stocking stuffers!

I have put a challenge to all of you this week. To join my Kiva team and make a $25 loan. Kiva is a worldwide organization with field partners who arrange loans for people to better themselves and prosper. Loans are raised thru Kiva members and the field partners distribute them. Typically loans are paid back within 6 months to a year and reimbursed back to you. The average member loan is $25 and it doesn't take long for a loan request to get filled. I have done several loans to them over the last two years and a portion of the revenue made from my site and course material is given to Kiva. You probably noticed that at the bottom of each newsletter is the Kiva logo and a link to join my lending team. Help others by joining the TA-Picks Team and share the wealth.

Technical Analysis is all about pattern recognition and repetition of those patterns. As I look at my DOW chart this week after DOW pulling slightly over the last two weeks, I noticed that the duration this overbought period matches exactly the last period in the March to May time frame. The red boxes in the Slow Stochastic chart are exactly the same length before the drop. Are we in for the correction I thought we were going to have 3 weeks ago? Hard to tell... Ireland has officially asked for assistance (polite way of saying 'asked for a bailout') from the EU and IMF today (read story here) and currently the DOW futures are up 63 points, Nikkei is slightly up as well as gold and silver. One thing is for sure, they want to keep DOW above 11,000. If the market drops and it nears that level, there's some kind of news or event that triggers it to go back up. I've taken off the pit helmet but it's kept not too far away, just in case. If you look at what happened after the first overbought period, you can see why I'm keeping it handy!

I have several picks this week as many stocks have pulled and have gone into an oversold condition over the last two weeks. Is this an indication of what's ahead of us, I certainly hope not! Some of them are not quite ready and as the week progresses I'll make sure to send out a Technical Update on them as my triggers in QuoteTracker get set off. If you're not using some sort of alert system to notify you when your favorite stock hits a certain price level or an above average volume day or other technical triggers, I highly recommend you start using one. It makes trading so much easier. QuoteTracker is the one I use and has the capability of connecting to a variety of data feeds. You can download their free version from their site at QuoteTracker.com. I have a whole chapter in my Fundamentals of Technical Analysis course on how to set it up with different data feeds, how to setup alerts and how to draw those pretty lines on charts.

Ucore Rare Metals Inc. (TSX-V: UCU)

One of my favorite technical setups... An oversold condition on both the Slow Stochastic and the Relative Strength Index anda touch down on the 200 SMA line. And to make it even more interesting, we have a Falling Wedge pattern. So as long as the 200 SMA holds, or it doesn't drop below the wedge formation, we might see it break out of the wedge and make a go for $0.56 soon and give you a nice 51.3% gain from current share price. The proper way to play a Falling Wedge formation is to wait for the break out of the formation on good volume. This would make the entry in a few days at around $0.40. The REE sector has cooled down in the last few weeks and is the reason why I am not putting my high target at $0.69. If it turns and starts to run again, you can always re-evaluate your position as it nears the initial target.

EMC Metals Corp. (TSX: EMC)

I have kept relatively quiet on this stock. I recently finished re-reading a book called "Trend Trading for a Living" by Dr. Thomas K. Carr where he talks about what he calls "Indication Candles". These are long candles with long tails (or wicks) that are telling us what will happen to the stock in a short while. The direction of the wick it the direction the stock price will move in. I thought it was an novel concept at best and it didn't really warrant any particular attention to it. Many stocks exhibit these candles and more often than not, I found that it was caused by market manipulators pumping or bashing a stock. However, EMC Metals on the day of the Indication Candle (October 15th) did not have any comments on any of the bulletin boards and nobody was talking about it. The more I started looking at charts looking for them, the more I saw them. Just look at the Ucore chart above (October 20th candle).

Although this is hardly a chart pattern, like a Cup and Handle formation, I would consider it a Candle Stick pattern. Like a Doji candle at the end of a run up (or down) is considered a reversal pattern, this would fall under the single candle patterns. So I took a chance (not having played this candle pattern before) and bought into it before the day closed. A week later it had dropped and moved back up but had not moved yet as the book indicated it should! Grrrr, I thought. I closed all of my positions before leaving on vacation but kept this one. Sure glad I did. John Kaiser, a noted newsletter writer, placed a buy recommendation on EMC Metals on November 15th and stock soared to a high of $0.255 within a few days from $0.10. The Indication Candle worked and we now know why there was a peak and a spike in volume 2 weeks before. Nice accumulation Mr. Kaiser :)

We have seen a small pull back from that high, which had to be expected as people took profits, but I do believe it is now getting ready for its second run. This time two factors are making me recommend this stock. First a Symmetrical Triangle, although a small one (they normally take longer to form) and secondly, wave #3 of an Elliott Wave Principal (yes, another book I read). This is a more advanced topic in the field of Technical Analysis but if your interested in learning more, do get the book and read up on it.

Entry on EMC Metals would then be at $0.22 (breaking the down trend line of the Symmetrical Triangle) with an initial target of $0.35 for gains of 59%. Your stop loss from an entry of $0.22 should be at $0.185 where support is right now. This stock will most likely be mentioned a few more time by me as Mr. Kaiser has placed a multi dollar target on it and its bound to provide good swing trade opportunities as it ebbs and flows upwards.

Lithium Americas Corp. (TSX: LAC)

Having recently posted a Triple Top, Lithium Americas has returned to its previous support level and allowed the indicators to come down into the oversold area. This is a relatively new listing on the Toronto Stock Exchange having completed their IPO in May of this year and has a small float (73.8 million shares). You can read more about the IPO and their property here.

What got me interested in this stock is the 5 red down candle before stabilizing around the support line. More often than not there is what is called a Dead Cat bounce after that kind of a drop in share price and this is what I am hoping to play. I would make entry above the resistance line at $1.50 with a stop loss the recent low of $1.43. Initial target would be $1.70 for gains of 13.3% followed by $1.90 for gains of 26.6%. If it does reach the $1.90 mark in my swing trade time frame (3 weeks), I would certainly reconsider my position at that point and perhaps hope for a break out of the top resistance line. But let's first concentrate on getting that 13.3% gain...

Harte Gold Corp. (TSX-V: HRT)

Even though the indicators are almost overbought, I like the Ascending Triangle pattern on Harte Gold and the increase in volume on Friday's close. Not quite considered break out volume, but perhaps accumulation in anticipation of a break out. The apex of the triangle is about a week out and I've been had before where the stock broke out before the apex and I missed the boat! Technical Analysis is not a 100% accurate science.

I would make entry as it move above the red line on the chart (at $0.73) with a stop loss the raising lower trend line. Initial target would be next resistance line at $0.93 (which was set back in 2004) for gains of 27.3%. The next resistance line above $0.93 is at $1.14 and was also set in 2004.

Magellan Minerals Ltd (TSX-V: MNM)

Here's one that I didn't even notice until now on my scans. It has posted a nice run up over the last3 months and has pulled back from its recent top failing support and returning to it. This has allowed the indicators to go into the oversold area and have begun to turn upwards. Magellan Minerals is a gold exploration company and gold stocks have done well in the recent past.

I'd like to see more volume on this stock as its typically below what I look for, but could still be a good play. Entry would be at current share price of $1.20 with a stop loss around $1.14. Initial target would be about half the distance to the top, or about $1.33 for gains of 10.8% followed by the recent top at $1.45 (I'm not counting the wick portion of the top) for gains of 20.8%.

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