Weekly Stock Newsletter #17

July 7, 2006


"It's my opinion but it's your money!"

Dear Canadian Stock Investor,

The overall Venture market crossed its 30 day moving average this week which is something very good to see.

This indicates that until something changes (a drop below the 30 day moving average), our trend for the overall market should be up.

I don't know how long but anybody who tells you they know is just guessing.

I think you should start slowly accumulating positions in some quality speculative securities.

I will try to recap what are some of my picks that could do well in the coming months.

First off, let me start with BVE.V, Bayswater Ventures. It is now down more than 20% off the huge volume spike last Friday. I thought that this volume spike might spark a new interest and uptrend in the stock but that has not happened yet. The current share price is only one cent above the 30 day moving average so unless it moves higher on Monday you should acknowledge the stop and sell your position. Taking a small loss here is a good idea because we may have been fooled by a one day only stock distribution. We won't know for sure until next week. But for sure if the stock moves higher on Monday stick with it because things look promising. But if it falls again, let me repeat, don't be shy to pull the trigger and sell your position. The market is telling us that we are wrong for the time being. We must take a small loss and either wait for the next bullish trend or shift our capital elsewhere.

What other options do you have?

Well I am still cautiously bullish on Aurelian (ARU.V). The stock is up by unbelievable amounts since the beginning of the year but it can go higher. The price is still well above the 30 day moving average which currently stands at $16.89. I have also not yet seen any massive volume spikes that would signal a distribution of stock by the pros. So I say buy with a stop loss that moves up with the moving average. If the share price breaks the previous high then I recommend we average up because that means we will be going to a new all time high.

On the flipside though, be very cautious. The current upswing is scarily parabolic and most times when share prices go parabolic, they fall down parabolically to where they were before the ascent or even lower.

If the stock price loses steam and falls below the 30 day moving average, make sure to liquidate your long position and even think about going short a little. There are so many gaps upwards in such a short period of time that if even one drill hole disappoints or the Ecuadorian government decides to play a little taxation trick on us, the share price could literally tank.

Also watch the volume carefully for a volume spike because this could signal a top with the pros cashing out massive gains and selling to the euphoric masses who always lose in the markets. So just be cautious.

With all my chat about accumulation and distribution, what are some possible candidates that are currently being accumulated?

Well first of all there is Strateco (RSC.V). They had a beautiful run up from $0.36 to $1.75. In other terms, a 386% return from bottom to top. That is the best case scenario of course but I think we are currently setting up for another run like this.

The volume is low as is the occurrence of news. In other words, it could be the "calm before the storm". The share price is currently flat lining between about $0.80 and $0.90. And it has stayed like this for over a month.

In my opinion that signifies a strong chance of professional activity. The pros always accumulate in low volume and when public interest is lowest.

The last time the share price flat lined like this was in February and March. We have currently been flat lining for about a month. That means that there could potentially be another month of flat prices while the pros continue to accumulate cheap shares. We could get a price break out sooner but I think by September it will have occurred.

Those are just musings, not predictions. I am mainly a trend follower so I shouldn't be buying RSC. However, I am pretty sure that if the price explodes, it will really explode and even the first day could offer gains of 20%.

Therefore I think it could be wise to buy ¼ to 1/5 of the position you would feel comfortable holding eventually very soon. $0.80 seems like the bottom of the flat range so if the price dips there, establish the test position. Keep a 20-25% stop loss in case I am terribly wrong in which case you are only losing 5-7% of the position you wanted to eventually establish.

A 5-7% downside compared with a triple figure upside seems very attractive to me.

However, if the share price does break out like I think it has the potential to do, start to pyramid your holdings up. Buy another ¼ on the breakout day. Then another ¼ if the price goes higher. And the last ¼ a few days later if the price is still rising. Then keep you adjusting your stop loss with the 30 day moving average which will help us ride the winner as long as possible.

Using the above mentioned techniques, I think another stock that may currently be being accumulated is Wavefront (WEE.V). I am very optimistic about the potential of the company's technology. The share price has recently trading in a narrow range between $1.96 and $2.20 approximately on low volume. This again opens my eyes to potential accumulation strides being made by the pros. The last time the share price flat lined like this, it subsequently rose approximately 20 fold. Don't think this will happen again but it's not impossible.

Once again, let's see if we can buy in around $2.00 with a small test position with a 20-25% stop loss. If the stock breaks out like I think it has the potential to, we simply average up and shift our stop loss to the 30 day moving average.

Those are the fascinating four stocks I am watching most closely at the moment. I am very interested to see how they fare in the coming weeks and months in view of my opinions.

That's about it for this week. Thank you for taking the time to read this and I wish you luck in your investing decisions,


Disclaimer: This letter is merely someone's opinion. It should not be taken as investment advice. Through viewing this publication or accessing our site, you agree to hold, its operators, owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. It's your money, so you are ultimately responsible for any gains/losses you may incur. Do your own due diligence! Writer may own positions in some of the mentioned stocks.