Stock Synergy, Momentum & Breakout

Even though I had no investments in the juniors for years, I still paid attention, waiting for Venture to turn – and now it has. Since late January, Venture has been on fire. I started buying the juniors in early February when the downtrend line broke and the precious metals came to life.

A few years ago I noticed a couple of very large technical patterns on the long term chart of Venture. The most important was an 8+ year ABC decline - wave A (initial sharp drop) in 2007-2008, followed by wave B (rebound rally) ending in 2011, and wave C (long slow decline) until January of this year. I'm not a big Elliot waver, but I pay attention to ABC patterns because they are very common and reliable chart patterns. During an ABC correction, I wait for the C wave to go below the A wave bottom (I don't think it's necessarily a requirement, but usually happens), and use a trend break for a good risk/reward entry point – good probability that the correction or bear market is over. This bear was so vicious it took the index down more than 85% - by all measures a true grizzly!

The other pattern was a 2 and a half year (2010-2012) head and shoulders. Once the neckline broke in 2012 the implied move was down 1000 points to Venture 400. At first I thought that would never happen because it was just too much of a move, but it eventually got to 466. Close enough, methinks (TA is not an exact science – or even a science for that matter).

On the basis of these 2 monster technical patterns appearing to be complete, and a host of other technical evidence (e.g., index is above its 20 day MA, the 20 above 50, 50 above 200 and all averages trending up. On all time frames, RSI above 50, as well as MACD buy signals with positive divergences) I believe the bear market in Venture is finally over and we are in the first leg of a brand new bull market. On a side note, one of the reasons I believe the US markets are headed higher is because I cannot conceive of a situation where high risk assets like junior mining stocks are rising at the same time as safer stocks are about to fall – it simply makes no sense that US stocks are setting up for a crash when Venture is flying high.

So what's next? Venture is seriously overbought short term, so a minor correction could begin any time, but a high probability Venture will not have a major correction (10-20%) at least until March next year (Venture likes to chose March for correcting). The crystal ball gets a little cloudy more than 6 months out, so I'll worry about next year, next year. Meantime, I'm all in...