Stock Breakouts And Resistance
Breakouts through resistance are the most desirable of all trade opportunities. (This discussion will be the buy opportunity discussion of breakouts. (An equal sell opportunity exists on breakdowns through support). A breakout is a penetration of resistance based on a pricing established over time with price reversals taken place at approximately the same price point in previous time periods.
Sounds easy. Well it sure sounded easy when that guy in the $1000 seminar told me about it. I also read how easy it was in the $90 book on trading that said would make me a wealthy independent trader.
Breakouts are wonderful if they continue. If they fail you can expect the pricing not to trend but to return to a range bound probably touching the lower pricing before it rises again. That price movement is probably beyond your stop loss and you will not be pleased.
This occurs more often than you want to believe. Since so many other people see the breakout they are as nervous about it as you are and you have a larger number of quick exits with the slightest wiggle. This is referred to as "buyers remorse" or a "bull trap". What this really represents is a serious hit against your P&L.
Remember, breakouts are a product of an established range bound market. The continuation of the sideways market is the rule with a move away from support or resistance back into the trading range. That means a failed breakout is the rule. The breakout is the exception. Some traders believe the reverse is true. That can cost you a bundle of cash in trading losses.
In addition, MACD Plays: When you are considering any stock you need to know if that stock is exhibiting a tendency to trend. If you wish to be more successful in your trades, then you should be able to identify those stocks with this tendency. Logic dictates that you will make more profits in trending stocks rather than in those issues that fluctuate up and down.
The 1 Rule Stock Market Insiders Are Richer Than European Royalty
I was watching Oprah the other night. She was covering the reality of the crappy lie called the American Dream that says just work hard and everything will be Peachey keen in the land of the free and the home of the brave. She pointed out that 1% of the U.S. population now control 40% of the all American wealth. If you are not born into that 1% today, she pointed out, then it is much harder today to work your way into it. You have to work a lot more hours for a lot less pay and your extra hours are just making the 1% richer. Meanwhile if you have the right connections
Why Is Eric Sprott A Uranium Bull
Eric Sprott may be Canada's answer to Warren Buffet. He's got the Midas Touch and currently manages more than $3 billion. We talked to Eric Sprott about uranium and why he is bullish on nuclear energy.
Uranium had been inching higher from 2001 until a year ago. Since then, it has soared up the price chart. What is a realistic price for uranium and how high can you envision it reaching?
There is obviously a shortage between current mine production and current uranium consumption. In order to correct that imbalance, it would have to be economic to open up new deposits. I'm not suggesting that it (uranium) has to go to $100 to become economic. I don't think that's true. Probably at $50, it becomes very economic. The reality is that we've been so slow in getting started that I think the whole nuclear industry will ultimately prove to be the key energy source of the future. With demand today at 170 million (pounds), who knows? It might be 300 million pounds in twenty years. The argument in the article we wrote is that based on the previous peaks, prices if you put a normal inflation rate on it, it would equate to something like $100. So, it's not that far fetched that we might get there.
If it takes four or five years, or up to a decade, to get a nuclear reactor going, why are the Chinese building so many so quickly?
Because they've been doing it right. One of the nice things about a centrally organized government is they deal with big issues. Obviously, China has a big issue in energy. If you were sitting over there, you would realize, 'My god, we're starting to import two million barrels of oil. We used to export coal and now we don't export coal. What are we going to do if our growth rate continues to grow at eight or nine percent per year? How much power are we going to need? And where is it all going to come from when there are already shortages of the two most commonly used energy sources in the country?" The option you fall back on is, 'Well, let's go nuclear. We have to go into all of them.' And of course, now they're predicting two nuclear reactors every year for the next ten years. Who knows? Maybe five years from now, that will be four reactors every year. Perhaps when we all realize the extent of the energy shortage.
How is this going to be sold to North America and Europe in the wake of Three Mile Island and Chernobyl?
The way things might change is now that we have $50 oil, and the price is almost going up in an unlimited fashion. Now that we've got coal at double and uranium that's gone up, people might finally realize there is not an infinite supply of certain things that we rely on. And that we might have to take a more pragmatic view of the nuclear option. I'm sure that is exactly what certain countries, including Japan, China and France, have done. The other thing is that there is a new reactor where you can't have a meltdown. I'm not technically strong enough to explain it. The uranium is in graphite spheres, and they won't melt down unless temperatures reach 2000 degrees. The highest it ever goes to is 1600 degrees so it's just not going to melt down. It doesn't matter if things are out of control. They won't break down. If that kind of assurance were accepted by the public - if someone could prove that that was the case - I think the nuclear option would be an incredibly viable option. Another thing that would make people think differently would be having brownouts for a while, or hyperinflation because of the shortage of coal, natural gas, and diesel fuel. If we had brownouts for a while, and of course they have brownouts in China, which is probably why they are proactive in moving nuclear along.
How realistic is the global energy crisis moving toward a Hubbert's Peak, an energy scenario from the year 1970?
My view is that it seems very realistic. I think it is very important that we do go back to 1970. Look at the fact that Hubbert said in 1956 that 1970 will forever peak out (in terms of energy production). Lo and behold, it peaked out! It almost goes down every week in the United States. Almost every week, there is a little less production. This is now with very high oil prices. It looks like his theory, for the geographical area called the United States, worked. Do we think it is going to work in the world? I tend to believe it is. I believe there are projections for Great Britain, which I think are at about 4.2 million barrels/day right now, that in ten years from now, will be down to 700,000. That's what happens when fields go into decline. They go down, and you can not resuscitate them. Everyone who studies the topic knows that no significant discoveries have been made since the 1960s. What I mean by significant are giant oil fields - like Ghawar. For example, people now consider a 100-million barrel field a big deal, and 500 million is great. Well, one hundred million is like 1.2 days of world's supply, and 500 million is eight days supply. You have got to find a lot of those every year. We don't find them. We have hardly found anything. The Caspian Sea? I am guessing it is 500 to 700 million. It's the one thing we point to, the thing in the Caspian Sea, which we have been pointing to for the last three years. Let's say it is 800 million barrels, it is ten days' supply. It's nothing.
There have been some pretty incredible estimates as to how high oil can go. The highest we're read of stands at $182 for a barrel of oil and $15 per gallon of gasoline. Your comments?
When you get into any commodity, where there is a bonafide shortage, there is no limit on the price. There is hardly any limit on the price. Because that last guy still wants that last barrel of oil. I always say, when a commodity is starting to break loose, 'Never put a ceiling on it because you never know where it is going to go.' You look at what is going on in the world oil situation. If I was (in charge of ) certain countries, I would probably be changing what I'm doing. You can see China going throughout the world signing agreements with countries to assure oil supplies. It's a government mandate to go out and secure their supplies. I think people at the government level realize, 'We have issues here that we have to solve. If we don't have assurance of supply, what happens?' One thing about Hubbert's Peak that most people don't go to is the economic impact. Forget the price of oil. What if we produce 83 million barrels today, and in 25 years we have 55 million barrels? What is the world going to do? Do we just have to shut down economies because we don't have a replacement for hydrocarbons?
Do you think the world governments are prepared for this?
Not at all. They show no interest. In fact, I would say one of the real problems with the democratic process is, unfortunately, too much time is spent thinking about politics. Hardly any time is spent planning for the future.
On uranium, you recommended a number of uranium companies in your special report. Cameco (NYSE: CCJ) seems to be the one many recommend. Other uranium companies seem to be in the exploration or the more speculative category, and now have some momentum because of the bull market in uranium. How strong are the fundamentals in those companies?
I think the fundamentals for some of the companies are spectacular, quite frankly. It's interesting for us because we had the same thing happen in gold, when the price of gold was $250. We tried to imagine what we should buy if, and when, gold went to $400, which we thought it would, or $500 or higher. The real opportunity always lay in, 'We'll find someone who has a large resource that is uneconomic today, but if you move the price up, it becomes quite economic.' I would say Strathmore (TSX-V: STM). They have a large resource already identified. In fact, they are acquiring properties all the time that were identified years and years ago. Yet, at $20/pound uranium, they probably don't make any sense. But, at $40/pound uranium, they are likely to make tremendous economic sense. Of course, the value of the shares can almost - not go up exponentially - but they can go up a lot. You finally tip over that breakeven level, and everything after that is profit. We had an analogy like that in gold area, where one guy went out and bought all these deposits that would make sense at $400 gold. The stock has been a tremendous winner. I think it is up 500 percent. I think the same can happen in uranium. That's why we go to Strathmore and UEX (TSX: UEX). There are a couple drilling in Saskatchewan: JNR Resources (TSX-V: JNN) and International Uranium Corporation (TSX: IUC).
How do you feel about precious metals?
We feel pretty good about precious metals. We've been pretty bullish for quite a while now. We have liked the fundamentals for gold for a long time for any one of ten different reasons. The one reason I fall back on, that gives me tremendous comfort, is the fact the world consumes 4,000 tons of gold per year, but mine production is 2,500. Anybody who uses any bit of logic knows, in due course, the price will go up to reflect the imbalance between demand and supply. I don't care how much gold Central Banks sell, ultimately they are going to have no gold. I think people realize that Central Banks have made a big mistake selling their gold.
The China card keeps driving global commodities as they bring their country more technology. How do you feel about the base metals?
We haven't really gotten involved in the base metals. One of the reason we haven't gone there is we have believed we are in a secular bear market, and there could be a financial implosion. In that kind of scenario the base metals don't do well. But the precious metals can provide safety. That's the distinguishing mark we make between the two. On the China thesis, the demand for all of these things would go up. Our problem is we still expect some fallout in the financial arena, which ultimately would even affect China. We feel more comfortable with the precious metals, and we feel more comfortable with energy. Simply, energy demand in an economic implosion is pretty inelastic. It doesn't fall off the table. Demand for zinc, lead, copper, and aluminum can fall quite precipitously if there was an economic slowdown.
Are you expecting an economic slowdown?
Absolutely, yes. We might be in it now. There are certainly lots of signs that there is not much robustness in the U.S. economy. I have some very strong views as to what should ultimately happen in the U.S. My views are predicated on the fact that the government reports a deficit of $400 billion, but there are also government reports that suggest, on a GAAP accounting basis, that the true deficit in 2003 was $3.4 trillion. We can all ignore it, and everyone has ignored it. But, the reality is that the liabilities are accruing for Social Security and Medicare in the U.S. at a tremendous rate. There has been no provision for it. There was a paper released by the U.S. Treasury Department about a year ago that said the present value of their obligations, that are not funded, is $44 trillion. Again, we can choose to believe it or not believe it. I happen to believe it. I made the point that politicians are in it to be re-elected, and they are not dealing with the real issue. The real issue is they are making promises to their citizens that they can't keep. And they're not going to keep them. I would hate to be a retired person or a young person in the U.S. Somebody is going to have to bear the brunt of all these funding issues that haven't been taken care of. Beginning in 2008, the baby boomers start collecting these things. That's a real cash problem. Before, it was just a bookkeeping problem. You'll have a huge influx of people collecting their Social Security and getting free Medicare. It's got to be funded. Anyone who's looked at the problem has agreed that no one has done anything about funding it. You have to cut what your promises were, which is what all the European governments are now trying to do. They're all cutting back on the pension. Most companies are cutting back on them because they can't fund them. The trend is in place here: What we thought we were going to get, we're not going to get it. Am I bearish? Gosh, we've had forty years of living off of savings that were supposed to be saved to provide this future. It was all spent. Everyone just chooses to ignore it.
Founder and Chairman of Sprott Securities Inc., Toronto, one of Canada's consistently top-ranked investment firms. After earning his designation as a Chartered Accountant, Eric entered the investment industry working in research as well as institutional sales. In 1981, Eric founded Sprott Securities Limited (now Sprott Securities Inc.) which, under Eric's leadership, has become one of the most successful investment firms in Canada.
Eric Sprott has established himself as a clear leader in Canada's investment community. With over 30 years of industry experience, his expertise at making predictions on the market and recognizing investment opportunities with superior growth potential have been proven many times over. His investment abilities are clearly demonstrated by the excellent performance track record of Sprott Managed Accounts, Sprott Canadian Equity Fund and the Sprott Hedge Fund L.P.
At the 2003 graduation, Eric Sprott, President, Sprott Securities Ltd. and Carleton alumnus for whom the Sprott School of Business was named after, was awarded a Doctor of Laws, honoris causa by Carleton University in recognition of an outstanding career as an entrepreneur, investor and philanthropist.
What Makes A Successful Stock Trader
I'll be telling you about 15 characteristics of a very successful trader.
Trading in stock isn't everyone's cup of tea. Some people can do it and some can't. Even among the some who can, not everybody can be successful at it. While there are no hard and fast rules on what makes or doesn't make a successful stock trader, those Wall street Wizards that you hear about who made the most in the least amount of time, all appear to have certain characteristics in common.
1. Successful stock traders are able to go against their natural instincts.
2. Successful traders have a simple system. No matter which technique you use as long as you stick to it. A Successful trader knows their technique and makes trades based ONLY on their system. "The secret to being a winner is consistency of purpose". You want to improve a separate strategy for getting into a position and for exiting one.
3. Successful traders are risk Adverse. Successful traders don't like losing money and prohibit themselves before losing too much, even if it means admitting they made a mistake.
4. Successful traders are willing to make mistakes. Successful traders have the right and ability, not to do the right thing, but to do the wrong thing. It's the ability to make your own mistakes.
5. Successful traders don't care about being embarrassed by taking a loss. Successful traders expect to take losses and know when to cut them.
6. Successful traders know, or learn how to explore stocks. Many traders only use precise analysis, but you may want to learn to use fundamental analysis as well.
7. Successful traders lead balanced lives. We all know the pleasure of the pursuit and the stock market can be addicting, a successful trader is one who knows when to move away and can.
8. A successful trader is Patient. A successful trader let's winning positions run, but is able to back out when proven wrong. Patience can mean resilience, courage, and conviction for when markets go against you.
9. A successful trader has a biting Desire to succeed. Triumph takes steady work not a chaotic effort, a biting desire to succeed can make all the difference in educating yourself about what you want to know and sticking to your strategy when the going gets rough.
10. A successful trader is disciplined. Very disciplined. A successful trader will do what he needs to do, even if he isn't in the mood. Discipline also means Sticking to your strategy, not abruptly buying or selling on a whim, or because of a" hot tip"
11. A successful trader knows the difference between defensive and offensive behaviour, and when to use each. - protect your money first, profit later.
12. Successful traders don't eavesdrop on rumours or get emotionally involved. To be a successful trader you have to be very hard on yourself. Your have to be able to resist the urge to prove you are right and be ready to make mistakes. . You also want to be able to not let emotions affect your decisions. Setting up stop loss points for every decision you make is something that you are going to have to do. That will mean more than occasionally admitting that you are wrong. You and your portfolio will survive and you will be able to get back into the position again when trends signify that the time is right. You will have to learn to disregard any emotional ties you have to your stock and make quick stock trends your master. You will miss the lowest entry points and the top selling points, but you will be able to sleep at night. You will need to learn to get out of a stock position before your profits turn into losses.
13. A successful trader knows themselves. Successful traders must be attentive of their strengths and weaknesses. Your strengths and weakness will become very important. Play on your strengths when you can.
14. A successful trader knows their investments. Your investments are almost as important as you are. Know the past history of the stock and their strengths and weaknesses as well.
15. A successful trader sticks to the rules. The system is there for a reason. Nothing can ruin a successful stock buyer as quickly, or as certainly as flouting the rules.
Get to know these 15 characteristics and you are on your way to becoming a successful trader.
A Call On The Price Of Uranium
Before we talk about the potential of uranium shortages and the steep price rise in that energy source, could you explain how you got started with this idea, and what is the philosophy behind Strathmore's acquisition program of uranium properties?
Several years ago, Strathmore Minerals started with the idea of acquiring properties "out of the money" at very cheap prices in the belief that the uranium prices would recover so that our assets would be worth more. No one was paying attention to the commodity we chose: uranium. Strathmore Minerals is basically a call on the price of uranium. That's how we started the company. This strategy is similar to what Lumina Copper (AMEX: LCC) used and what Silver Standard used. For example, the chairman of Silver Standard Resources (NASDAQ: SSRI) is on our board of directors. Our first step was to buy every pound we could for as cheaply as possible. The second step is to buy property that we think we can put into production. We are actively looking for those.
But uranium has a powerful environmental stigma. Why, then, are you enthusiastic about this type of energy source?
As with most people, when I began investigating uranium, I thought this was bad stuff. I thought of Three Mile Island and everything else. The more homework I did on this, the more I realized that nuclear power is clean and safe. That is primarily what uranium is used for now. It should be known that no one ever died at Three Mile Island. No one actually died at Chernobyl. Yes, people got sick. Compare that to coal or the oil spills in the fossil fuel sector, and the damage it has done to the environment. The problem is no one is championing nuclear energy. Frankly, the "greenies" have done a great job of burying the story. As I did homework, I found out France relies on nuclear power for about 78 to 80 percent of its electricity needs. I realized that somebody did a great job lobbying and built a very unhealthy picture toward uranium, when really it's needed. We don't talk about the cost of coal. We don't talk about global warming. But, look at what coal has done. Global warming is a function of fossil fuels. That is why you are seeing a growing positive response to nuclear power. For example, one company has applied to put a new nuclear reactor into the US.
To what do you attribute the recent, steep price rise in uranium?
Since last year, the price of uranium (U3O8) has climbed back steeply back up. At one point, the price was moving up about $1/pound per month. Uranium's price is more in line with the price of oil as opposed to other commodities. For a long time, we've only produced on the average about 90 million pounds, when we needed 140 (million pounds). There's been an imbalance for a number of years. This extra came from foreign sources, or from internal US inventories. Since the 1980s, we've been using more uranium than we have been producing in the western world. As a result, the extra that we've needed has come from Russia, the US government or inventory that utilities had.
But most investors, let alone the consumer, don't know that uranium's spot price has nearly tripled, since bottoming three years ago. Why is that?
Uranium only makes up one percent of the cost of running a nuclear reactor. The biggest factor in why uranium prices can go up, even more rapidly than gold, is that uranium is insensitive to its use. Uranium prices can go much higher. In casual conversations with a few Toronto analysts, some believe it can go up to $80 or $100/pound. For example, if the price of gold tomorrow went to $800/ounce, it will affect someone's purchasing decision. The guy might say, "I was going to buy this ring and now it's up 70 percent because the price of gold is up. Maybe I will buy a silver ring instead." The same occurs with other commodities. People may change their purchasing decision based on a commodity price doubling.
If the price of uranium went to $44/pound, the average consumer's electricity bill might go up a few dollars. It is not going to force someone to turn off their power. However, if the price of oil doubled tomorrow, many of us would be driving smaller vehicles. It would make a fundamental difference in how we behave. That's not going to happen with the price of uranium. It's like buying pencils for your office. It's not going to change the way you do business. Even if no nuclear reactors come onboard for the next few years, the ones already there will need the pounds (of uranium). We have a shortage coming up.
Why do you believe a uranium shortage is in the cards?
Bottom line is: the nuclear reactors are going to run out of fuel. You have to know that permitting takes a long time in the uranium industry. It's not like finding a gold property tomorrow and maybe two years from now you are pouring gold. Typically, the permit takes at least three years out. Because nuclear reactors need it, that's what is causing the price rise. Demand has kept going higher, but production has fallen off the chart. In this industry there are only about half a dozen companies exploring for uranium. At one time, back in the late 1970s and early 1980s, there were almost 150 uranium companies. There hasn't been any underground mining since the early 1990s. And that doesn't even include a wild card: there has been talk that by 2020, 90 percent of the nuclear reactors coming onboard will be for China.
And what would reverse uranium's steep price rise?
The only thing that could kill this market would be if Russia discovered it had a lot more pounds to sell. Or the US government, through USEG, came up with more pounds. When we first entered the market, eight years ago uranium rose to around $17-$18/pound. Then it fell. What happened was the U.S. government sold their uranium to a private group, who turned around and dumped it into the market, from then until last year. In October of last year, the Russians were also dumping uranium onto the market for their hard cash.
If replacement value for uranium comes in the form of exploration costs to find and mine this energy source, what would that cost be?
Realistically, it would be $20 to $22/pound. I know some are going to say they can do it for less. By the time you take your exploration costs, development costs, and so on, you really need to get $22 to $25 for most properties to go into production and still make money. That's why most of what you see in the market are ISL (in situ leach) projects. On one property we discovered, it would cost between $16 and $17/ pound to pull it out of the ground. But on others, it might take $20 - 22/pound to pull it out of the ground, after labor costs and sell it on a forward contract. Canada is producing the most uranium because of the grades. Some say Canada has the lowest cost, but that's not quite accurate. What they mean to say is that the cash costs are the lowest. People forget that it costs up to $2 billion to put some of these into production. Cameco (NYSE: CCJ) was a creature of the government at one time. They were treated that way.
Earlier you noted that investing in Strathmore Minerals was "basically a call on the price of uranium." Can you clarify what you meant by that?
As uranium prices, the share price of Strathmore Minerals should rise. If you look at Bema (Amex:BGO), when gold prices were at $265/ounce, what was it worth? As the price of gold moved up, it had value. Has it gone into production yet? No. Silver Standard (NASDAQ:SSRI) is similar, but it has had to tell its story because people are so focused on gold. The key for investors is not to go where the crowds go, but to go where you can find value. If you believe that nuclear power is the place to be, and the shortage is real, you have got to own uranium stocks.
What sets Strathmore Minerals apart from any other exploration companies in this sector?
I challenge any junior exploration company to show an individual who has actually put an ISL (in situ leach) uranium mine into production, including Cameco. They just aren't around because the industry has been dead since the early 1980s. There aren't many experts left in this business. The last standing geologist, which Cogema had, was David Miller, who is now working with Strathmore Minerals, as our head consultant. He is the one who has put the Strathmore strategy together. We've been looking in southern and eastern Africa. Strathmore is going wherever there are pounds that others have overlooked. Our competitive edge is a database we acquired from Kerr McGee (NYSE: KMD), which used to be number one in the uranium industry. Recently, we announced properties in Wyoming that could be satellite ISLs. We have enough pounds there that we could throw one of them into production. But we still need higher prices. We are still in the acquisition stage.
Strathmore is going to be very aggressive in picking up properties that we think have pounds in the ground or smaller properties that we think can be ISL-able in the US. Everything we're looking at in the US is for ISL. In Canada, we have over 700,000 hectares in the Athabascan region. That's a major asset for us. It's one of the richest areas in the world for uranium. Some of our targets are near existing mines. In Quebec, we've got a large property that was drilled by Uranerz. Robert Quartermain has certainly been a part of that strategy. That's what he did with Silver Standard, and that's what we're doing here. We are aggressively going after properties. When sophisticated investors meet our team, they see the story we've got and they see our management. You'll see why we were able to millions of dollars in financings. Our strategy has been to buy the has-been properties, the low fruit in all the trees. And that's what we've been doing.
Mr. Randhawa founded Strathmore Minerals Corp. in 1996 and is currently the Company's CEO. Mr. Randhawa also founded and is currently the President of RD Capital Inc., a privately held consulting firm providing venture capital and corporate finance services to emerging companies in the resources and non-resource sectors both in Canada and the US. Prior to founding RD Capital Inc., Mr. Randhawa was in the brokerage industry for 6 years as an investment advisor and corporate finance analyst. Mr. Randhawa was formerly the President of Lariat Capital Inc. which merged with Medicure in November 1999 and the was the founder and former President and CEO of Royal County Minerals Corp. which was taken over by Canadian Gold Hunter (formerly International Curator) in July 2003. Mr. Randhawa also founded Predator Capital Inc., which became Predator Exploration. Mr. Randhawa received a Bachelors Degree in Business Administration with Honors from Trinity Western College of Langley, British Columbia in 1983 and received his Masters in Business Administration from the University of British Columbia in 1985.
Which Uranium Companies Are Leveraged For Increased Nuclear Energy Demand
Summary: Sprott Asset Management uranium expert Kevin Bambrough talked with us about the "second leg" of the current uranium bull market. Bambrough names his favorite uranium companies, where he believes there is still room for growth.
StockInterview: How does the major nuclear energy build up you envision impact uranium mining?
I think, with the passage of time, all types of mining will again be done again in the United States. They're going to need the supply. There is no alternative. If you look at Energy Metals Corporation (TSX: EMC), part of their plan is to start with some ISL operations, some of which will come at a facility that's already fully permitted. Then eventually, they're going to try to move into places like New Mexico, where I think with the passage of time, common sense will prevail and people will become more pro-mining for uranium.
StockInterview: We now have about ten times the number of uranium companies, some purporting to be a "uranium company," than when we first started covering this sector. How is this sector going to play out?
It's been very difficult to try and follow what everyone is doing in this space. Right now, the uranium story is looking so good. It's still relatively early that anyone seems to be able to raise some money, tell a story and perform well. It's unbelievable how the sector has performed this year. With the passage of time, the guys with the real resources, who can also develop them and produce, are going to do well. The other guys are going to have to keep coming back to the market, raising capital, raising capital and diluting their shareholders in order to try to drill and find something. Of course, there is going to be the odd one here and there that actually strikes something big. It'll give people hope but, that's not the way we want to invest.
StockInterview: Have the uranium stocks gotten out of control? Are we looking like another train crash like the internet stocks of a few years ago?
The majority of stocks in the uranium space, we will not own. We only own a really select few, probably just over a dozen. We have some explorers, we have some producers and we have some, what we believe to be emerging producers and we're sticking with that mix.
StockInterview: So which companies do you like?
Obviously, there is a lot of mud slinging that goes on in all sectors of the mining business. You talk to different people, and they say, "Oh this is going to be higher cost, that is going to be higher cost, and our properties are better than their properties." From where I sit, Energy Metals (TSX: EMC) was one of the companies to get in there early, and pick up a lot of known resources and databases. I think they've done a great job of doing exactly what they said they were going to do. We started funding them in the early days. Those are the (types of ) companies I want to stick with.
StockInterview: What do you like about Energy Metals?
I'm happy to say that we're a very large shareholder of Energy Metals, and I continue to love the story. The most recent presentation they gave shows what the company will look like after they fully complete the Standard Uranium and Quincy Energy mergers. The combined entity in their presentation shows to have about 236 million pounds of uranium resources, I believe, and a market cap of around C$360 million with $60 million in cash. We're still a shareholder of Paladin (TSX: PDN). I think we're up about 40 or 50 times on the first shares we bought. If you compare the two, you've got a market cap of close to C$2 billion on Paladin with around 180 million pounds. If you look, you'll notice the real big move in market cap occurred, when Paladin started to get close to production and they signed contracts. Now Energy Metals has about one-fifth of the market cap and a fully permitted ISL facility down in Texas. They're at the point where they're going to sign the contracts and move forward into production. I think people are going to wake up and start giving them more credit. I think that positive permitting developments will continue to occur in places like New Mexico. Obviously, the friendly environment in Wyoming for bringing on production will make Energy Metals perform very well going forward. It's going to be fantastic for shareholders if it can duplicate the move that Paladin has over the last year or so.
StockInterview: You said earlier "common sense would prevail" in New Mexico. How does that impact Energy Metals?
New Mexico is more in the back burner for now, but I think the stock (Energy Metals) will continue to perform well as the regulatory environment continues to improve in the area. I should touch on Strathmore Minerals (TSX: STM). We've been please to see they've been bringing out their (National Instrument) 43-101's on a couple of their (New Mexico) properties and show an increase in reserves. I believe they're doing some work right now on their Dieter Lake project up in Quebec that could be interesting. They've got some good resources and reserves. I think at some point, someone is going to want to cut some deals with them, or they're going to just keep chugging along and bringing things forward.
StockInterview: You were excited about Tournigan (TSX: TVC) the last time we talked. How is that one turning out?
Tournigan is really developing into a great story. Originally, when we first got into this, it looked reasonably valued and interesting on its gold prospects. When they picked up deposits in Slovakia, we got in deeper. I think the story just keeps getting better as we look more into what they actually may have in these properties. They've also brought on a new hire, who was the head of the Slovakia uranium program years ago. He's joined the team and he's basically said that the Jahodna district) is probably not just a 3km strike length but probably more of a 7km potential. The current resource estimates are only based on 500 meters of the zone. They're going to start stepping out and drilling it. We're hoping it could get much bigger. It's open at depth as well. There is also reasonable chance this could become a large uranium district. They've found out there were a lot of other targets in the area, in the past. They are going to try to work these targets as well. Slovakia is a major past producing country. A lot of its power currently comes from nuclear. They have two other properties in Slovakia with resources. They're going to drill and are hopefully going to show better grades and larger resources, with time. Of course, you're always hopeful, no guarantees, but our experience is that in the uranium business: As you go and drill old properties, redo old drill holes with larger cores, you get better recoveries and can show higher grades. That seems to have been the case for both Tournigan and Western Prospector (TSX: WNP). I should also mention that on the Jahodna property, it's interesting that, not only did the uranium grade jump but also the molybdenum grade jumped up substantially to where this is now some very valuable rock.
StockInterview: Any final recommendations?
SXR Uranium One (TSX: SXR), I think it's a great story. There's no doubt that the uranium is there, but some people debate about how difficult the mining is going to be and what the cost will ultimately be. But they've got a good gold credit in there to help bring down the overall cost. Again, we believe the uranium price is going to be much higher than most people believe for a lot longer. We love investing in companies with huge resources and plenty of leverage to both uranium and gold.
StockInterview: Do you still see some of your uranium holdings, certain ones as cheap, still in play, and to be looked at?
Most definitely, and we'll be helping to finance some all the way to production.
An Introduction To Cfd Trading Part 1
Here's a really simple yet useful tutorial on CFD trading that will get you up and running very quickly if you're new to CFD trading.
By the time you finish this article, you'll know how CFDs work, what makes them highly profitable, and understand the costs involved in CFD trading.
CFD stands for Contracts For Difference, which is a derivative product, where you profit from changes in the prices of stocks and shares.
For example, if you buy a CFD on a stock that's $5.00 and the price rises to $5.50, then you profit from that change in price. So if you bought 1000 CFDs, then your profit is $500. That is, the value of the CFDs mirror the underlying stock prices, and you can profit on this movement.
The reasons why CFDs are a very popular trading product, and understandably so, are:
1. CFDs are traded on leverage, and this leverage is typically 10 to 1, with some CFD brokers providing 20 to 1 leverage. This means that a trader with a small float can make decent profits from trading the stock market by using CFDs. For example, you may have a stock trading system that makes a 30% return per annum. On a $5000 float, this is $1500 profit in one year. With CFDs, because of the leverage, the same system can now produce a 300% return, which is $15 000 profit in one year.
2. You can just as easily short sell CFDs as well, and therefore profit from falling markets. This greatly increases the profitability of a trading system because trading opportunities increase dramatically, and the fact that you can profit from both bull and bear markets.
3. The costs in CFD trading are relatively low when compared to stocks. This is especially so, since for a similar and often smaller cost per trade, you can gain 10 or greater times the results from a trade due to the leverage available. The 2 main costs in CFD trading are interest and leverage. We'll come to these in a moment.
4. You can set automatic stop losses. This means that it will take you less time to trade, remove the emotion from exiting a trade when you should, and allow you to exit as the stop is hit, not a day later. You therefore avoid the slippage due to getting out of a trade later than when you intended.
5. You can place all your orders in the evenings. With many CFD providers, you can place orders to enter a position the night before. For people who are working, this is a great advantage as they can do all their trading (place their orders to enter and their stop losses) in the evenings, and not need to be at the computer screen or call their broker during the day. Also, if they have any stop losses that need adjusting, they can do so in the evenings as well. Their trading routine with a mechanical system can be about 10-15 minutes per day.
So these are the advantages of CFDs that have made trading accessible to so many people because they provide large returns for a modest float, and can also be traded once a day as well.
Now, we mentioned that there are 2 main costs in CFD trading. Let's have a closer look now at each of them:
1. Commission. With some CFD providers, there is in fact no commission. This also greatly increases the profitability of your CFD trading systems, as well as the fact that you can benefit hugely from the leverage. With other CFD providers, there may be a commission of say 0.15% of the trade size or $15, whichever is greater, each way. These costs are similar or less than the commission associated with stock trading, especially when you consider that the multiplied profits that the leverage gives you.
2. With CFDs, there's interest charged for long positions that are held overnight. For short positions, the interest is paid to you. The amount of interest charged is usually a reference rate plus approximately 2%, and the interest paid is usually the same reference rate minus approximately 2%. And the reference rate is usually a major bank's overnight interest rate.
For example, the interest rate charged for overnight held long positions may be 7.5% or 0.075 per annum. To calculate how much this is for a trade, we need to make it "pro rata". That is, we'd need to divide the 0.075 by 365, multiply it buy the number of days in trade, then multiply it by the trade size. For example, for a trade size of $10 000, held for 14 days, the interest cost is about $28. Not a huge cost. For a short trade, the interest is paid to you, so will offset the cost rather than contribute to it.
So there you have it.
You now understand the benefits of trading CFDs and why they're a trading instrument that allows people with a modest float to make very decent returns, as well as understand the costs involved with trading CFDs.
To learn more about CFD trading, watch out for part 2 of this article.
Learn Stock Trading From Playing Poker
Picking good stocks is only the first step to become a consistently profitable trader. Those of you that track the performances of stock picks I post on http://www.cisiova.com/analysis.asp know that it is impossible to determine if a stock is good without a good exiting strategy. And for most traders, exit strategy is the hardest part. Many people say that to trade profitably you need to develop the right mentality. Unfortunately, such winning mentality can only be developed through experience. However, there is a short cut to get through the learning curve without throwing thousands of dollars in the process. This short cut is playing POKER.
Yes you heard me right. Apparently, playing poker has a lot of similarities with investing in stocks. First of all, they both deal with money, uncertainties, and a keen judgment of potential risk and reward. In this article I will explain the similarities and differences between stock trading and poker. But before proceeding, make sure you know the rules of Texas Holdem and fluent with the terminologies.
Think of stock picking as looking for good hands to play. In Texas Holdem, you can look at the two hole cards and decide whether you can play the hand or not. Similarly, you can analyze the stock before entering a position. Fortunately for you traders, no one will raise pre-flop, so you just pay the commission. Remember to exit the position you also need to pay the commission, which implies that the cost of entering a position is two times the commission. Good poker players only play good hands, so you should do thorough researches before entering a position. One good thing about trading is that you do not have to wait for good stocks like poker players wait for good hands, you can find good stocks on stock picking websites or using screeners to find them yourself.
Once you call the blinds in poker, you get to see the flops and two more cards. Think of these cards as the performance of your stock after you enter the position. In poker, the flop can make a good hand, a medium hand, or a bad hand (by helping your opponents). In trading, you can observe the potential of the stock as well, and you should objectively judge the downside and upside potential of the stock. In poker, there are times that you have a good hand, and your opponent have a better hand, and you know you are beat. These are the times where your mentality matters the most. An experienced poker player will fold his hand regardless of the amount of money he has put into the pot. As a trader, at times that you think the upside potential fails to actualize, you should sell the stock regardless of how much you have lost. On the other hand, when a good poker player knows he has the winning hand, despite the possibility of losing at the river, he would bet aggressively, without fearing the small losing possibility. In trading, this translates to if the stock goes up and manifests higher upside potential, you should not fear that you will lose your recent winnings. Therefore the winning mentality is to ride when the stock is going up, and sell when the stock is losing its heat. This discipline is easily said than done. So many times I have heard people lost all their money because they hold on to losing positions (due to hope) and sell winning positions too early (due to fear).
By playing poker, you would get the chance to master your emotions, learning not to hope when you are beat, and not to fear when you are favorable to win. You want to lose small and win big, not the opposite.
Now go practice. This mentality only develops with experience.
Lows And Highs In Stocks
In stocks, traders and investors base their bids/asks, or buy and sell on lows and highs. The high and low in some instances have pips, currencies, spreads, or shares involved.
Most people in the trading industry will use charts to keep updated on pips. Pips are what traders call percentages factored into points. The percentages are quotes that determine the price set on currencies. The charts help these traders to keep track so they know when to buy and sell.
In the business, small and large banking institutions, as well as large and small companies invest in stocks, or Forex exchange. Using charts, the traders are provided quotes on both sides, which make up ask and bid phrase, depending on the stock market. The bids make up pricing, which is prompted once indicators within programs alert traders on Base Exchange that occurs between buying currencies on opposing sides. Once the alerts come in, the trader may select "ask" has the pricing occurs. The trader bases exchange on his, 'ask' which could flip at the drop of a dime.
Quotes enable traders to set their marks on pips, which can decide decimals that rise over the averages. In stocks, decimals convert in some instances to match exchange within the currencies of a sole country. Decimals base values, which are constant at all times.
One of the largest industries and growing is Forex. The foreign market exchanges currencies in stocks that have reached in the trillions of dollar brackets. That is trillions in a sole industry. This fiscal market has made the highest mark in the stock market industry. The market has overridden the largest United States equity branches.
Charts are employed in Forex. The guides, aid traders by allowing them to read, interpret through indicators, which send signals. Within the charts are treks, basic strategies, powers, and so on.
Anyone intending to get in on stocks or in the stock market, should take time to learn about highs/lows, bid/asks, charts, pips, spreads and so on to avoid increasing the high risks. Staying informed is the key to successfully gaining in any stock exchange. Still, you want to choose charts and information that offers you precision in the stock market, Forex exchange markets and other stock industries.
Your best solution for just starting out is to download free charts that allow you to monitor and analyze, while exploring pips, spreads, highs, lows, currencies and so on in stocks.
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