By Kevin Marder
Among the names, Eldorado Gold /zigman2/quotes/208573595/composite EGO -2.34% is a low-priced Canadian explorer and producer of gold. The stock, priced at 4.85, is extremely speculative and should only be considered by very aggressive speculators who understand price action.
Most Wall Street analysts who follow the company expect EGO to record an earnings-growth jump from an estimated three cents a share in 2016 to a forecasted 13 cents a share next year. However, in light of the extended nature of most gold miners' charts, the more important factor with EGO is the stock's eight-week base.
The stock is ranked in the 96th percentile for relative price strength over the past year, while its industry group has earned a 99th percentile strength rank over the past six months. The shares are under extreme accumulation (concerted buying) over the intermediate term.
Despite Eldorado's low share price, liquidity is solid, with average daily dollar volume at about $38 million and market capitalization at $3.5 billion.
A very aggressive player may consider using the base top of 5.16 (the high of May 16 and 17) as an entrance pivot for a breakout play. Should EGO break out, patience should be exercised given the fact that there is a mound of overhead supply, i.e. resistance. Using the depth of the base, a measured move calculates a target of about 6.30.
As always, a protective stop should be used to mitigate risk, along with a starter position that is half normal size, or less. This initial position could be added to if the stock proves itself. According to the company Web site, earnings are expected to be reported July 29.
For a larger chart, please click here .
Chart created using MarketSmith . ©2016 MarketSmith Incorporated. All rights reserved.
U.S. Steel /zigman2/quotes/200069642/composite X -4.91% has shown excellent relative price strength since the Feb. 11 market low, while earning a 97th percentile rank over the past year. Its group, steel producers, is ranked in the 99th percentile over the past six months.
Last Tuesday, price broke out of a three-month base, up 5.5% on volume 20% more than average. There are a couple of entrance possibilities. The first would be to enter long around Friday's close of 21.68. Using a stop of just below the base top of 20.55 would equate to 5% risk, or less than 3% risk if a half-sized starter position is used.
The preferred entrance would be on a pullback to between the 10- and 20-day moving averages. This would take advantage of the tendency for the first pullback following a breakout to be an opportune place to enter. On a measured move basis, a possible target would be the upper 20s.
For a larger chart, please click here .
Chart created using MarketSmith . ©2016 MarketSmith Incorporated. All rights reserved.
As expected, the impressive performance of the average stock, i.e. breadth, led to last week's breakout by two of the three major averages from their multi-month basing formations. Momentum, or the internal strength of the market, has in essence bought the market some time before the inevitable divergences show up. Further upward revaluation is anticipated.
While some may feel uncomfortable with the averages at new-high ground, strength begets strength.
Kevin Marder
For intraday market comments and stock ideas: https://twitter.com/mardermarket
Earnings estimate data provided by Thomson Reuters.
The views contained herein represent those of Marder Investment Advisors Corp. ("MIAC"). At the time of this writing, of the stocks mentioned in this report, Kevin Marder and/or MIAC held no positions, though positions are subject to change at any time and without notice. This information, which may have been previously disseminated, is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance of any security or strategy is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to MIAC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Neither MIAC nor any of its affiliates will be liable, and we accept no liability whatsoever, for any losses any recipient of this report may suffer as a result of his or her or its use of this report or any of its contents.
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