You may recall that we did a very good trade in Golden Ridge Resources Ltd. (GLDN:TSX.V), buying it back in the Spring, with the initial purchase at C$0.13, and then selling at least half of it very near to the top early in September at about C$0.47 right before it caved in, which meant that we more than tripled our money on what we sold in less than six months. The theory was that it would run up ahead of drilling results from its highly seasonal properties in the Golden Triangle and then fizzle out and drop back when they were released, unless they were really spectacular, and that is exactly what happened. We played the same game with Aben Resources Ltd. (ABN:TSX.V; ABNAF:OTCQB), which also worked out well. We further reckoned that it would then probably remain a rather dull market until it cranks up again for the next drilling season in the spring. However, there is now reason to suspect that it might not wait until the spring before it starts to advance again—and right now it is at a very good entry point.
Reasons that Golden Ridge might turn higher again soon are as follows. It is understood that the company's rigs will not be completely idle from now on, furthermore, the Golden Triangle is becoming a hot prospecting district that is attracting more and more interest, and finally, after a grueling continuation of the precious metals sector bear market into early September, it at last looks a new bull market is getting started as the broad market crumbles into a severe bear market, with one of the few places left to hide being the precious metals sector.
On the latest 3-month chart for the stock we can see where we took profits on at least half of a position early in September, when we realized that the breakout from the presumed Flag pattern was a false one. Soon after we sold it gapped lower and has basically headed lower and lower ever since, exactly as expected, with interest gradually dwindling. Now, however, it is showing signs that the decline has run its course and that it has the capacity to start higher again. Bullish factors to take account of are that, after the latest dip, it has dug into a zone of strong support near to the rising 200-day moving average, whose origins we can see better on the 14-month chart. Volume has last dropped back to a very low level, indicating that selling has probably been exhausted, and finally the appearance of a small bull hammer several days back on increased volume is a bullish development. So all in all it looks like it could start higher from here, or soon, especially given that the outlook for the sector is brightening. That the Accum-Distrib line has held up well on the decline is another positive sign.
It's also worth taking a quick look at the 14-month chart to see where we bought it back in the Spring, and also to see the origins of the support that the price is now dug into. It arises from the peaks that formed at the upper boundary of the base pattern that developed during the first half of the year—there was quite a lot of trading in this price zone with the earlier sellers in it now providing quite strong support at this level. This is why the price should not drop further and is likely to turn up soon.
Conclusion: taking all the above factors into consideration, Golden Ridge looks like a strong speculative buy again here. Buyers should be aware that some patience may be required before it gets moving again, although not necessarily. The company's stock started trading on the US OTC market towards the end of August, where volumes are still relatively light. There are 78 million shares in issue.
Note that we have a similar setup in Aben Resources (ABN.V, ABNAF), which is another Golden Triangle stock, but it is not liked quite as much as Golden Ridge, because of the large gaps as it descended and the fact that it rose 7.7% (+14% on UTC) on Friday, so we'd have to pay more now.
Golden Ridge website.
Golden Ridge Resources Ltd, GLDN.V, GORIF on OTC, closed at C$0.175, $0.13 on 26th October 2018.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.[NLINSERT]
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Charts provided by the author.
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.