Discovery Watch: Sea change on the Venture as pot stock volumes dry up
In his Tuesday Discovery Watch broadcast, John Kaiser sees trouble ahead for pot stocks while a seasonal buying opportunity is opening up for junior mining stocks.
Click for larger (image source GT Gold)
Kaiser points out that in September and October, the non-resource listings on the Venture Exchange were trading between $100 million to $200 million a day while the resource juniors were only trading $15 million to $25 million per day, but this week non-resource trading value has dropped to $64 million while resource stocks is still hanging within its range.
Kaiser believes there is still a base load of investor interest in the resource sector that is not going a way. It is a different story for marijuana stocks. Kaiser notes:
The weed stocks are however being sold, which is not being helped by insiders trying to sell as fast as they can.
He also notes that this pot stock selling is taking place against this bigger backdrop of a broader market sell-off.
Who wants to catch a falling cannabis knife? That sector is in trouble.
Of course, mining stocks are not immune from the market downturn, particularly with reporting season nearly finished for junior mining companies in B.C.'s Golden Triangle. Kaiser points to recent price action in GT Gold (Sunny; GTT) with its Saddle North discovery in the Golden Triangle:
It has reported several holes which are spaced enough that investors can triangulate and say we have a Red Chris analog shaping up
But we are dealing with the seasonality that has plagued certain Canadian resource plays such as those in the Golden Triangle that are likely to get snowed in over the next few months. As a result, despite 5 drill hole results still pending GT Gold stock got hit Tuesday after news was released from two holes, even though Kaiser suggests there were no surprises in the announcement.
The problem is that it will be May or June before any work resumes says Kaiser. Combined with overhang from a previous financing and negativity in the overall market, Kaiser does not expect a quick recovery in the stock.
The seasonal effect is not going to be limited to GT Gold. Kaiser expects stock pries of many junior companies to sink on the back of lack of investor interest in the group. Kaiser also points to the recent plunge in Aben Resources (ABN) as another example of seasonal blues.
Kaiser also points to Eskay Mining (ESK) which was hit with news on November 9th that SSR Mining (Mixed; SSRM) plans to end the SIB property exploration agreement. He believes the stock is also unlikely to get short-term help from neighbouring Garibaldi Resources (Rainy; GGI) which was once trading over $3 and now is trading at just above $1.00.
So far, Garibaldi has not delivered anything that is going to change the current trend.
With the season wrapping up, it is probably tough luck for Eskay Mining in terms of expecting any help from the neighbour next door. Overall, Kaiser suggests it all adds up to capitulation on the back of indiscriminate selling in the resource group. However, he believes that is opening a fishing season of opportunity, providing a lot of candidates for his upcoming 2019 bottom fishing report. Expect to hear more about the fishing adventure in future broadcasts.