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BROADENING FORMATION


Frontier Gold

06/08/10 12:13:09 PM
by Koos van der Merwe

Investors go to gold when uncertainty exists, but in today's market, with gold ETFs readily available, far less money goes to gold mining shares than in the past.

Security:   FRG.TO
Position:   Sell

Frontier Gold (FRG) has stated that the company intends to become a significant gold producer. Their solid financial position and strong operational team gives them the ability to advance their key gold projects through to production. Future potential production platforms include their Long Canyon, Sandman, and Northumberland projects -- all located in Nevada, one of the friendliest gold-mining jurisdictions in the world. On June 7, they issued a report of a new high-grade drill result from Silica Ridge, one of four gold deposits that make up their Sandman project that attracted investors.

FIGURE 1: FRONTIER, WEEKLY
Graphic provided by: AdvancedGET.
 
Figure 1 is a weekly chart and shows how the price moved from a low of $0.41 in July 2004 to a high of $17.65 in April 2007. From there it fell to $1.55 by November 2008. The price is trading at $6.61 at the moment and started moving up before the market recovery from March 2009, suggesting that it is not only gold that attracted investors, but company performance. Do note the relative strength index (RSI), which is suggesting that the price is approaching overbought levels, although looking back at the chart, we can see that a definite buy/sell signal was never given by the indicator; only caution was suggested.


FIGURE 2: FRONTIER, DAILY
Graphic provided by: AdvancedGET.
 
Figure 2 is a daily chart and shows that a sell signal was given by the RSI in April 2010. From that point, the stock price has moved in a broadening trumpet-shaped pattern, a formation that suggests uncertainty.

Going to gold is a strategy used by investors in times of uncertainty, and with the market uncertain today as to whether a double-dip recession or the start of a recovery is on the cards, investors are looking for safety. Frontier Development Group is a share that looks inviting, especially with the positive reports recently issued. Charts, however, suggest caution for the medium to long term. Short-term traders could take the risk of an increase to the $6.82 level.




Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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