The Stock Melt-Up

The one subject foremost on people's minds is what is causing the stock meltup in GBN.V shares. Imo, it has nothing to do with what the company is involved in presently. The meltup is highly likely to be as a result of a commercial trader folding their tent as their anticipated crash of GBN.V shares is not materializing, and their sought after return in another market is not materializing, either. Thus the short squeeze. They were nearing the end of the year, so it was time to close out the trade.

Commercial traders working out of the banks first sell hundreds of thousands, if not millions of shares into the market which they first do not own in order to raise cash, and then bet that money using leverage on another stock which is rising. The fact that they settled in a panic says they have bought the story on inflation and are getting out of the way.

But don't take it from me. Take a look at the chart from EPL.V, which had the same panic rise, many multiples in price, and subsequent melt-down. Two shares endeavouring separate goals in differing commodities, and yet the meltup is identical. No real news, no real event you can point to.

stockwatch EPL.V

Eagle Plains

It becomes even more obvious when the EPL.V price is overlaid on the GBN.V chart:

The likelihood of two different companies involved in completely separate projects, one a base metals company with small exposure to gold and different fundamentals, and one a gold project with little exposure to base metals yet entering into production, will perform identically is extremely marginal.

It has happened before that gold companies wrongly abandon their gold projects for base metals plays, so this might be an indicator that the two are going to be mashed together.

But I wouldn't be surprised that more stocks have performed similarly in recent weeks.

As for GBN.V reporting on the 24th of Dec, they just didn't want to report any earnings for Q4, that earnings should start in Q1 of 2011.

-F6