Issue link: http://resourceworld.uberflip.com/i/198816
at t he mark et Rod Blake Extended Sideways Consolidation D o yourself a favour and take a long look at a one-year chart of the TSX Venture Exchange. Now, other than the shock of seeing that the exchange traded at about two-thirds the value of what it was just one year ago, take a closer look at the pattern that has developed over the last three months or so. Notice that following the bounce off a very oversold bottom to the 860 level, at the end of June, the junior exchange did indeed form the positive reverse head and shoulders pattern that I mentioned in my last column. More interesting now, is the length of the right shoulder. Since the third week of July, the right shoulder of this pattern has extended more or less sideways for some three months now in a very narrow range between the 910-950 levels, which coincidentally, also happens to be the approximate level of the chart's 50-day moving average. I think this lengthy sideways consolidation along the 50-day moving average is significant. What I think we're seeing here is a market that is under steady accumulation along its near term support level. For the past three months, it seems that no amount of bad news, whether it's the talking heads ranting over the US debt ceiling or even the recent $40 plunge in the price of gold bullion to US $1,267/oz, can break this pattern. Trading volumes on the Venture Exchange have been steady as well, hovering for the most part somewhere between 115 million shares-a-day on a down day and over 150 million on a good day. There have been steady trading volumes, a steady index level and a steady 50-day moving average for over three months. To me, this is highly unusual, as I for one have not seen anything similar to this before. But what does it indicate going forward? I think that the market is saying that for the most part the bottom is in. After november 2013 more than two years of negativism towards resource stocks, whether they be oil & gas, uranium, base and precious metals or rare earths, investors are finally saying that this is the time to aggressively accumulate their favourites in anticipation of the next pending bull market in resources. I'll qualify my observation with the caveat that we may still bump up against that annual phenomenon of last minute tax loss selling that could drive the index lower short term. But other than this, or some other unforeseen world calamity, I think this market is building a very strong base from which to move higher. If I'm right, the extended length and strength of this sideways consolidation indicates that the last of the negative selling is coming out and being absorbed, taking a lot of future overhanging resistance away from the market, and setting the TSX Venture Exchange up for an extended move higher, probably going into the New Year and perhaps beyond. Here's hoping that I'm right. n Rodney Blake is an Investment Advisors with Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp, MemberCanadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Rodney Blake, Canaccord Genuity Corp, or its subsidiaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this article, we do not assume any obligation to update the information or advise on further developments relating to these securities. This article should not be considered personal investment advice or a solicitation to buy or sell securities. Canaccord Genuity and holdings of its respective directors, officers and employees and their associations, from time to time may buy or sell any securities mentioned herein. The views expressed are those of the author and not necessarily those of Canaccord Genuity Corp. Rodney Blake can be reached at 604-643-7567 or rod.blake@canaccord.com www.resourceworld.com 27