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An Emergency Entry Level |
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Everyone is talking about gold these days. Let’s see if I’ve got this straight. The US Federal Reserve is printing money as fast as it can in order to pay the US Government’s bills- not too prudently spending $1.3 trillion more than it takes in.
Some Europeans countries (can you spell Greece?) are likely to do the unthinkable and default on their sovereign debt.
The European banking system is teetering on the brink of complete demise- much like the US financial institutions in 2008. The EU- being a bit of a rag tag group of have (Germany) and have nots (there’s Greece again) countries, can’t agree that 1. Their banks are broken with over leveraged balance sheets, and 2. The banks are nearing the point of no return.
So, what happens to currencies in an environment like this? Well, the currencies of the overleveraged countries goes down, and the currencies of the financial strong countries goes up.
But- hold the phone- If the Dollar and the Euro are in big trouble, where does the long currency money go? Well, it would go to the currency of the most fiscally stable country in the world- China.
But- hold the phone again- what if China is too controlling, and doesn’t let its currency go up based on supply and demand so it can keep its manufactured goods competitive on a global basis?
You got it- put the phone down. The world has found a replacement currency, and GOLD is it. GOLD has not made this meteoric climb as a precious metal or a hedge against inflation. It’s climbing because it has become the 21st Century bull market currency.
So, until the European banking crises and sovereign debt issues are resolved gold is likely to continue climbing. Until the US enacts a plan the market likes to control and reduce deficit spending, GOLD is likely to continue climbing.
While simply buying gold might be part of the answer, don’t you find it hard to buy something that has moved so far and so fast? I do. I saw an interview with Robert Prechter the other day- one of the all time market gurus- he said he loved gold at $284, but he’s not interested at $1800.
I get his point. So, how does one intelligently participate in GOLD?- through junior mining stocks. This is a hot sector, and will likely continue to be hot for a while. There’s a real disconnect- Gold either has to come down $500 per ounce, or junior miners need to go up. It’s inevitable.
This is an emergency report. I was planning on putting it out in a day or two, but the way this stock is trading- I felt you needed to see this immediately, because there might be a strong bounce here. I don’t want you to miss it.
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All American Gold (OTC BB: AAGC): Let The Drilling Begin |
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Here’s a couple of factoids to get us started.
- Nevada is the #1 producing gold state in the US
- Nevada is the #4 largest producing gold region in the world
- 5.6 million ounces of gold were mined in Nevada two years ago
Now, I don’t want to talk a lot about AAGC, because this idea is mainly technical. The chart is telling you to act immediately.
So, let’s go through this quickly. AAGC has 3 gold mining sites in Nevada- the Goldfield West property, The Golden Jackpot property #1, and the Golden Jackpot Property #2.
Goldfield West is the most important today. AAGC just announced it was commencing drilling on the property. The particular property is located a mere 4 miles from International Mineral’s Gemfield Deposit.
Historic production of above 17 g/t au per ton has come out of this area. The means the area yields 17 ounces of gold for every ton they mine.
According to CEO Brent Welke, 138 drill holes have been completed in the area, and an 800 meter long north/south structure has been identified.
A test drilling in this section in 2010 yielded the possibility of gold values up to 1.45 g/t.
All of the drill holes will be focused on both ends of this structure, and results will be compiled by and independent geologist.
There’s two more areas just like it for AAGC to work down the road.
Now- let’s get on to the good stuff.
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A Retracement Fibonacci Would Be Proud Of |
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After 23 years of stock watching, I think I’ve got it nailed. At least some of the time.
I have found over the years, the highest probability, lowest risk entry point one can have in a stock is a perfect 61.8% Fibonacci Retracement. Go ahead and Google “Fibonacci Retracement”. You will see all sorts of technical commentary and information about how Fibonacci Retracements are used by chartists.
This is the guy right here. 12th Century mathematician Leonardo Fibonacci was a pretty smart guy.
Along with the famous Fibonacci Sequence, he figured out many mathematical formulas and ratios that are still widely used today.
He observed ratios that constantly re occur in nature. The two key numbers he computed were a 38.2 ratio, and a 61.8 ratio. Here are some examples.
Most peoples arms go 61.8% of the way to the ground. Sunflower petals are 38.2% longer, or 61.8% shorter than the ones next to them. The pyramids are 31.8% lower from one to the next.
The Fibonacci Retracement has been the most tried and true technical indicator for me over the years, which is why I had to get this idea to you right away.
When I see a stock going up, I’m looking for a pullback for a favorable entry point. I always start looking when the stock pulls back 38.2% of the last move, but the ideal place to come in is a 61.8% retacement.
Want to see a perfect 61.8% Retracement? Check out the chart of AAGC.
Here’s the beauty of pouncing on a stock at the 61.8% retracement level. If the stock has dropped to that level, it’s either going to rebound, or it’s going to fall through that level.
Odds are it will bounce. But, if it doesn’t you can keep a tight stop, because any further price erosion means it’s likely going lower.
As you can see from the chart, AAGC started its run at about $.35 in early July, and made a high of $.95 a couple of days ago. In the last two days profit taking overwhelmed the stock. This is a nearly perfect 61.8% retracement, and the absolute ideal, lower risk entry point.
This chart is the reason I needed to get this idea to you today and immediately.
It’s clear the stock was hit with profit taking, and that panicked other, more recent investors to sell as well over the last 2 trading days.
The stock saw a low today of $.54, but bounced to close at $.60. The absolute perfect 61.8% retracement was $.5765.
This stock is likely to bounce. It might go back to its previous high, which would be huge technically. In the short term, it probably wants to bounce from here.
Here’s my thoughts on the trading side: Accumulate up to $.63. Set your SSL 10% below your entry level. This one could easily go back to its high in the $.95 range short term. If it does, there’s even higher levels ahead.
Look for the stock to bounce to its previous high, then work higher. When an opportunity presents itself, sometimes you just have to move on it.
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