Junior sector showing signs of recovery

There are some positive signs emerging in the junior resource sector and as long as we are not poleaxed by the Dow Jones we could see decent conditions leading into Christmas and beyond.

A few observations and comments:
 
Major increase in trading halts for capital raisings.

When we came out of the GFC there were a number of low priced placements and rights issues that had to be digested and following the brutality of June/July 2012 I see no major difference here.
 
Stale bulls the other resistance

Especially as long suffering shareholders will look to sell into the first sign of strength.  
 
The stellar performance of Sirius Resources (ASX:SIR)

Created much interest in near-ologists Buxton Resources (ASX:BUX) and Matsa Resources (ASX:MAT) and resulted in strong rallies from Peel Mining (ASX:PEX), Sabre Resources (ASX:SBR) and Marmota Energy (ASX:MEU).

These rallies are now spreading to other juniors across a number of sectors.

This is resulting in short-lived rallies lacking follow through but serves to highlight just how powerful the fear of missing out is.

Speculators have now seen Sirius run from 5.7c to $2.99 and they don’t want to miss out.

 

Source: ASX

When you think back to July it is amazing how the mindset of the speculator has changed.

Unfortunately mind power cannot alter geology and I think there are some major disappointments ahead and a vast number of traders are going to get caught out.

As Kim Slater mentioned to me recently on YMYC, lobster pots are easy to get into but difficult to get out of.
 
Anxiety levels must be increasing.

With more stocks now running on rock chips, soil samples, and geological similarities the temptation to liquidate the slower moving stocks in favour of spreading out into the “hot” stocks must be overwhelming.

This strategy might result in some early success but you end up owning far too many juniors and may lead to some nasty habits that many find impossible to eradicate.
 
The Dow Jones I believe is the biggest threat to what we are seeing now.

Even though there was a 110 point drop last night the volatility has been far too low for my liking and we could well see some 200-plus down sessions in the short-term.

This is perfectly normal considering how well the Dow has rallied and whilst it mightn’t signal a nasty bear market it could be enough to cause some panic across the exploration sector.
 
The IPO market remains lacklustre at best

However Boadicea Resources (ASX:BOA) listed yesterday.

Boadicea is immediately adjacent and along trend to Sirius’ Nova Discovery – the edge of Boadicea’s tenement is approximately 4.2 kilometres from Nova.

 

The company raised $1,120,500 under the initial Public Offer by the issue of 5.6 million fully paid ordinary shares at an issue price of 20 cents. Source: ASX

The fascination with selling a stock at a neat number continues.

At the time of writing on the sell side of Sirius there were only 3623 shares for sale at $2.97 but 157,550 at $2.99 and 232,675 at $3.00.

At $3.02 there were only 10,000 shares for sale.

Sirius’ all-time high thus far is $2.99 and I wonder how many sellers are now feeling stranded because they refused to a take a cent or two less?

Sure Sirius may power its way through $3.00 on the next major run but sometimes the calls of stocks going to 5c, 10c, 20c, 50c, $1.00 and so on need to be treated as a guide only.

Throughout my career as an advisor one of the hardest things to do for many people was to break 100,000 shares.

These days with fuel dockets you have your hand on the bowser until it clicks and you don’t worry about running it to $90.03.

I have suggested to some that buying odd parcels such as 123,579 of something could be worthwhile in taking the first steps to learning how to let go.
 
Positive feedback increasing.

We are starting to hear stories on forums and events where people are now boasting about how much money they are making.

Egos on the rise along with the spread of FIGJAM.

You should have seen it during the blow off phase in the Dotcom bubble but all I can say is that people should not ‘mistake a bull market for brains’.

If you know what you are doing and have a decent BS detector this is the type of market you want with the key being able to sell all the way up without the fear that some stocks might go higher.

‘This time it’s different’ are the four most expensive words in history and if this mini exploration bubble intensifies then they will become extremely relevant.