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May 06, 2008

Know This Seasonal Market Pattern
by Michael Swanson

I'm recommending a new junior mining stock today, but before I do that I want to talk a little about gold for a second. Yesterday I posted a members only article saying that I thought gold likely put in a bottom last week and that I was looking for gold stocks to make up half of their recent losses, with a target of the 450-460 area on the HUI. After that I expect gold stocks to pullback, probably with the HUI falling down back to its lows of last week, and then entering a period of consolidation that would probably last through much of the summer. The reason I see this happening is that many of the big cap stocks have been beaten down so much in the past six weeks that they will need to go through a period of consolidation before they can breakout to new 52-week highs and have a sustainable rally.

As as result I believe that the big cap gold stocks are worth only a trade for a rally up to the 450-460 area of the HUI while better opportunities now lie in the smaller junior stocks where true bargains can be found. The stock I'm recommending today for instance is poised to go into production and produce over $300 million in revenue and has a market cap less than $176 million. Stocks such as this can breakout and just go higher all year.

This morning I went back and looked at seasonal patterns for gold and the seasonal pattern seems to match the projections I am making from the overall chart patterns. It is worth knowing the seasonal patterns to the markets. Most people know the adage of "sell in may and go away" when it comes to the stock market, but there are even stronger seasonal patterns when it comes to commodities. There are traders who make lots of money by simply playing seasonality.

As you can see gold has a tendency to make a peak in the April-May time period and then consolidate through the end of August and then breakout in September and have its best months through the end of the year. This seasonal pattern held true in this gold bull market except for last year when the whole stock market experienced its first subprime meltdown last August. If it wasn't for that the same seasonal pattern probably would have held true again.

If the pattern repeats then we can expect gold stocks to rally until the end of the month and then retest their lows, maybe even making a slight minor low, in June or July and then base for a few weeks and breakout at the end of August or September to rally through the end of the year. This would fit the scenario I came up with yesterday from the overall gold and gold stock chart patterns.

What this means is that traders can buy large cap gold stocks now and sell at the end of the month with a mind of buying in the middle of the summer while investor should use the current dip to buy into junior stocks with real assets and cheap valuations as investments now. Investors want to use this dip to buy and should look for a future dip in the summer as a chance to add on or increase their exposure to gold stocks.

With today's new stock recommendation now is the perfect time to take a risk-free trial to WSW Power Investor. If you are not satisfied in 30-days all you have to do is let us know and we'll refund your money. That is how confident we are that you will find value in our service. To begin just click here.

Michael Swanson,
WallStreetWindow.com

Disclaimer: Michael Swanson is the President of USA Capital, Inc., which provides management, support, and research for institutional investors, hedge funds, and mutual funds. The ChartWizard is also an employee of USA, Capital, Inc. Both Swanson and employees and associates of USA Capital, Inc. may have a position in securities which they mention on WallStreetWindow or any of its services. In such cases, appropriate disclosure is made. Under no circumstances should the information received from WallStreetWindow represent a recommendation to buy, sell, or hold any security. WallStreetWindow contains the opinions of Swanson and the ChartWizard and is provided for informational purposes only. Neither Swanson, the ChartWizard, nor TimingWallstreet, Inc., which owns WallStreetWindow, provide individual investment advice and will not advise you personally concerning the nature, potential, value, or of any particular stock or investment strategy. To the extent that any of the information contained on WallSteetWindow may be deemed investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Past results of WallStreetWindow, the ChartWizard, or Michael Swanson are not necessarily indicative of future performance.

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