Why I Buy the Charts

Here's a gold stock I bought last week. I liked the chart and felt it was nearing the time of a breakout. It is up 30 percent in the past week.

I wanted to highlight it because I've done research on it and it doesn't sound like that great of a story. Note that I'm mostly looking for 10x returns minimum in this space, a good story/fundamentals is one that satisfies this requirement. From what I've read of the fundamentals, it's a somewhat expensive miner and there's no further exploration hits (yet) that would justify far higher valuation. The chart looked great though, close to perfetion. The catalyst for the move is their mine, the first commercial gold mine in Scotland, going into production. They expect their first pour by the end of November. In context, one can say this was probably a fundamental catalyst for the breakout, but the chart was also ready.

My main focus over the past year-plus has been buying every stock I find that looks like this. I do some basic research behind these companies. My strategy is to hold the winners long-term, separating the firms that have operational success, hopefully hitting some 20x and even 50x returns. I wanted to highlight SGZ as an example for why going with the charts first can make sense, especially if like me, you do not have extensive background in the mining space. I looked around to find mentions of this stock and didn't find much at all despite the great looking chart. I suspected the completion of the mine would shake the stock out of its consolidation and that's what happened. To be perfectly honest, I didn't expect the breakout would occur this quickly. I got lucky with timing my buy, had I waited a few days I'd be on the sidelines waiting for an entry on a pullback.

I also work from the opposite end, going through companies that are tagged as having 10x and 50x and even 100x return potentional, and sorting them by the charts. The very extreme cases are almost always a dart throw anyway because there are red flags or some binary variable such as the gold price (for a high cost resource) or permitting that makes for high optionality in the stock price. In this case, there are some stocks that I accumulate earlier in the pattern because I believe their fundamentals will carry them through pattern completion. Others I wait for a positive chart development.

Explorers can be highly uncorrelated with the market. It pays to note when there are drilling results expected. Many of these stocks halt, sometimes for days, before a news announcement. One stock I picked up in 2019 was Chalice (CHN in Australia). They hit a big discovery in March during the pandemic wipeout in mining shares, but went up nearly 8-fold anyway on the news. For some of these stocks with a good fundamental story, it will pay to buy into a boring stock that does nothing for many months on end.

Finally, here's a stock I picked up a couple days ago when it had positive news. I waited too long with this one and paid a higher price as a result. However, the pattern hasn't completed yet, so I'm not chasing a stock that is running away. The big breakout is ahead. The company is Kraken Robotics. They make undersea drones. The news this week was two contracts with the Dutch and Polish navies. There are competing for U.S. navy contracts as well. It looks like there's resistance into the low 70 cents area, but past that I think it could run fairly quickly towards its old all-time high, at that point completing a base that would imply a move well north of $1.50 per share.