Monday, October 30, 2006

Gold, Uranium Breakout

First of all, because of my sporadic updates, I am focusing more on long term plays as opposed to short term trades, even though I am still actively trading options. My short term plays aren't really that useful because I'm in and out so fast, that by the time I post, most of the move is over.

Gold broke above 600 today, a level it has been trying to break for the past 2 months. If this breakout is real, gold could begin a new leg towards new highs. Making it more impressive is the fact that other commodities are still consolidating (ie. oil), giving gold a chance to become the leader.

Historically, the gold/oil ratio has been about 15 (I think). This means is that it takes 15 barrels of oil to buy 1 ounce of gold. Currently, the ratio is 10, hinting that gold might outperform oil if this historical ratio holds.

Look for Silver to outperform Gold. During the last gold craze, silver rose much more than gold in terms of percentages. With real industrial demand for silver, I think silver will again outperform gold again during this cycle.

Nice to see small cap uranium stocks breaking out (thanks to Cameco's Cigar Lake flooding). Cigar lake was expected to produce 10% of the world's supply of uranium. With this delay, the uranium market will be squeezed even more (demand already exceeds supply by approx 100%). With the uranium obtained from decommissioned russian weapons ending, uranium could really shoot up vertically in a huge buying panic.

Also, I have turned neutral on oil, because it is too manipulated politically. The reason why oil is consolidating around this region is because OPEC cut production by 1 million barrels. However, as production increases from non-opec sources, OPEC will find it harder and harder to restrain oil supply. Although I expect oil to stay above 50 (prob. hover near 60's), I think oil will underperform other commodities.

Here is my long term portfolio update:

Mega Uranium (TSX: MGA)
Internation Uranium Corp (TSX: IUC)
Paladin Resources (TSX: PDN)
Royal Bank of Canada (TSX: RY)
Silver Wheaton (TSX: SLW)
Fording Coal (TSX: FDG.UN)

Notice I sold Cameco (CCO), Yamana Resources (YRI) and Baytex Energy (BTE.UN) and bought Royal Bank (RY), Silver Wheaton (SLW) and Paladin Resources (PDN) since the last update. I bought PDN basically from its chart pattern (because I was too lazy to research all the uranium plays).

Other small cap uranium stocks include: UEX, IUC, FRG, MGA, PDN, SXR. Check out Uranium Mining Stocks for more uranium coverage.

Friday, September 29, 2006

My Portfolio

Today, I withdrew a whole bunch of cash from my Canadian ING account and bought Cameco (TSX: CC0) and Yamana Gold (TSX: YRI) as long term holdings, thus breaking my rule about having 50% of my assets in cash at any given time. This lowers my cash balance to approximately 30% of my net worth. I figured that I'd rather put my money at where my mouth is, instead of collecting the 3% interest that ING Canada pays me for having money in the savings account.

Below are the stocks that I hold. My holdings are extremely undiversified (all in the commodities space). Since I am young, and have a job that pays me a decent amount of money, I figured that the money I have saved up/made from trading probably doesn't mean that much (I'm not planning to buy a house any time soon, especially since they are so expensive in the Seattle area). I'd rather focus all my money in one space and take a risk, especially since I believe so strongly in that space.

Baytex Energty (TSX: BTE.UN) 27.2%
Cameco (TSX: CCO) 23.7%
Mega Uranium (TSX: MGA) 14.8%
Yamana Gold (TSX: YRI) 12.0%
Fording Coal (TSX: FDG.UN) 11.5%
International Uranium Corp (TSX: IUC) 10.8%

I bought Cameco because I truly believe uranium is one of the safest things you can hold, with Cameco being the safest because they are the largest, and most diversified uranium company. I don't think uranium has gone down EVER in the last 5 years. If you buy gold or oil, they go down from time to time, but uranium NEVER goes down. With the pricing power of uranium still extremely strong (the cost of uranium is negligible when runing a nuclear power plant), the uranium price can probably surpass $200 in the coming years (currently it's 54). Since Cameco has basically stayed flat the whole year, I don't mind buying and holding, even though it may not move for a while.

I have to admit that commodities are making me nervous. If the economy slows down, demand for commodities will fall a lot and hurt their pricing power.

Saturday, September 02, 2006

Sector Watch

Although every blogger has their opinions of what the markets will do, here is what I think:


The nasdaq, along with the dow and S&P, managed a very low volume rise in August. With September being historically the worst month, I think the sellers will come back with full force. I expect the nasdaq to at least double bottom, if not break that bottom and go lower.

Crude oil

Crude oil recently hit its bottom trendline. Historically, Gold and oil has done well in September. With the fundamentals unchanged (demand still exceeding supply), I fully expect crude oil to continue it's uptrend.


Gold is a special commodity, in that it is more affected by psychology than by fundamentals. Unlike other commodities, which depend on supply and demand, gold is dependent on the dilution of paper currency, and on whether the people are willing to value gold as money. Right now, I believe people do think of gold as money, and thus, it will rise long term. Having said that, on the short term, I wouldn't be surprised if gold tries to double bottom (hit 600 or lower), before building a stronger base and moving upwards.


Copper is one of my favorite commodities, since the demand is so strong, that copper didn't drop that much despite all the "speculators" bailing on it. (Speculators bailed on all commodity stocks in May). Even though copper may retest $3.00 in the short/medium term, over the long term, I expect copper to remain a leader and to make new highs as the commodities bull market continues.

Cameco Corporation (CCJ)

Cameco is my favorite commodities stock, because uranium is the only commodity that never goes down. Contract prices of uranium is controlled by a small group of people. With uranium demand exceeding supply by 100%, uranium prices will continue to go up, making uranium companies more and more valuble. Cameco has already consolidated very strongly since the perceived "bubble" that occured in May. I think another breakout is imminent, and Cameco will rise to 55-60 dollars US in the short/medium term.


Other stocks I like include Freeport Mcmoran Copper (FCX) , which is my favorite copper stock since Phelps Dodge Corp (PD) decided to diversify and Yamana Gold (AUY), which is the best mid tier gold growth stock since Glamis Gold Ltd (GLG) was bought by Goldcorp Inc .

Sunday, August 27, 2006

Good looking stocks

Every so often, I like to do market scans to search for high relative strength stocks breakout out into new highs. Here are 3 I found:

Research In Motion (RIMM)

For the first time in 2 years, RIMM is outperforming the markets. Despite all the competition, RIMM is still the leader in converged devices (PDA, phone, email), as they are favored by the government and businesses. A knock against RIMM could be that their BlackBerrys are too big; but in the 4th quarter of this year, RIMM is expected to release a new BlackBerry that is thinner, smaller, and sleeker (shiny metal coating) than the BlackBerry 7100 .

Although it faces heavy resistance technically (at around 90), I think it will start another multi-year leg up as BlackBerrys will spread from businesses to individuals.

Overseas Shipholding Group inc (OSG)

Overseas Shipholding Group, Inc. (OSG) is an independent bulk shipping company engaged primarily in the ocean transportation of crude oil and petroleum products. Recently, it has been going up strongly, although it is reaching it's near term target of 72.

Novatel Inc (NGPS)

NovAtel Inc. designs, markets and sells high-precision global positioning systems (GPS). Although it has a short term target of 50 (assuming it continues its current pattern), it faces stiff resistance at that level. However, if it breaks out from 50, this stock could be a winner for a long time.

Monday, August 21, 2006

My thoughts on the markets

Although the markets have gone up a lot in the past week, I don't trust the strength we're seeing. There are a lot of signs that points towards a slowing economy, which means the markets will trade sideways at best. From what I can remember, September is a bad month, and I wouldn't expect anything different this year.

Regarding the commodity markets, I still think that we are in a long term bull market which will not end until 2015-2020. Fundamentally, nothing has changed; demand is still rising faster than the supply. This will cause the markets to remain tight and to build up "potential" energy for a more powerful "breakout" to the upside. Therefore, I would be very comfortable owning commodity companies for the long term, especially Cameco (CCO), which remains its leader.

By the way, feel free to check out the Elliott Wave webpage, by clicking on the links provided on this site. The people who run Elliott Wave provide some very interesting commentaries about the markets using a very unique methodology. In fact, the Elliott Wave theory was one of the first things I learned about the markets, and it is the reason why I became so intersted in it.

Basically, Elliott Wave states that the markets are patterned and predictable, following the waves of human psychology. Using this theory, it increases the probability of forecasting the markets correctly. I find the Elliott Wave theory extremely helpful, and I encourage you to check it out.

Friday, August 18, 2006


Sorry for the long delay since my last post. I haven't been in the blogging/trading mood lately, partly because the markets have been so frustrating. While I was gone, I got a job in a city that's south (across the border) from the city that I used to live in.

I'd like to make a comment about Google. I think today is the first time in over a year that GOOG did not close at its "max pain" point. "Max pain" is the price at which most options will expire worthless, thus maximizing the profits of the options issuers. The "max pain" point for Google is 380, but it closed at 383.5. (Normally, if max pain was 380, GOOG would close at 380.05 or something like that)

I think this is extremely bullish for Google in the short term. What I think happened was the MM's (Market Makers) were trying desperately to "pin" GOOG to 380, but they were unable to because the demand for it's shares were so strong. Because of this, I think the chances of GOOG rising on Monday (and in the near term) are pretty high.

Wednesday, May 31, 2006

Bought Freeport McMoran Copper (FCX)

I bought back june 55 calls on FCX at 3.20, which is 10 cents lower than what I paid last time. I like commodities too much to not have any exposure in it. I'm still monitoring it day to day, because I am still not certain that we have seen the bottom.