Exploration Market Calming Down

I've seen a few companies announce very good drill results before market open today, but their stocks didn't pop up all that much intially. The one I looked at more closely in the above post didn't pop up much at all: as of 1:24, it was unchanged on the day.

That news is better than it sounds. Either traders are becoming more cagey with respect to putting in hurried market bids before the open, or else excitement is fading. Granted that this news isn't good for someone waiting to sell on a great result, but it does give buyers a chance to look more closely at a company with a great showing. It means more time to think.

Unfortunately, given the previous hotness of the market, it may mean that previously hot exploration stocks may sink even if there's no fundamental reason for them to do so. The market goes in ebbs and flows; when excitement turns into disappointment, or to boredom in the face of other exciting opportunites elsewhere, bids tend to dry up and asks tend to come on the market. From what I've seen, some microcap tech stocks are capturing attention on the Venture Stock Exchange.

In a sense, it's a good time to get into an exploration stock that already satisfies one's due dilgence criteria. In another sense, it's not so good a time because demand for the stock may deflate further. The lucky person who gets in near the bottom is often treated to long spells of boredom. The not-so-lucky person who gets in the middle of a drop - in marlet parlance, "catches the falling knife" - is treated to long spells of frustration. The latter person's often tempted to just sell out and limit the loss.

As always, such a decision should hinge on the fundamentals. Granted that exploration-stock fundamentals are pretty thin in comparison with regular companies, but they provide solid ground to stand on if the market hits a cold spell or goes weird. The headline-chaser's more at risk of throwing the stock out the window at a loss - sometimes a serious loss. Headline-chasing's the exploration answer to drawign to an inside straight. It looks so easy in retrospect, but...

Someone who's done the due diligence and is satisfied with the company is more likely to hold on, even while riding a serious loss. Fundamental analysis in this sector is admittedly a grab bag of amateur geology, rudimentary finance and amaterurish mine engineering. With earlier stage companies, it's "outguess the geologist." As with all stocks, the ones that shoot up are hidden and need to be found out through combing through lots of news releases and company Websites. As with all markets, the reaction to future news items is unpredictable. Once the good news comes, it only makes sense to jump in if sure that there'll be more unexpectedly good headlines coming.

Now is actually a good time to start digging, without the pressure of a hot market making for haste. If you're interested, clicking the tag "goldexploration" will pull up several names I've featured in the recent past. Each example has a contemporaneous chart, alonng with a link to a current one, so you can see how each has done since the post. The capsule descriptions are intended as a springboard for your own due diligence, not as a substitute for your own checking. I may be wrong, and I have omitted features of the companies that others will find significant. A capsule is no substitute for a thorough examination.