It's Like a Day at the Beach

The listing of BQI (the new ticker symbol for Canwest Petroleum) on the AMEX proved another spark for the stock and helped propel us to new highs. We now feel much more comfortable as we have all of our trades in Canwest in the black now, as we hope that you do as well. We believed that the stock would level out at the $5 level, but we are roughly between $5-$6. Technically, we feel as though we must wait for another "screaming" buy signal before we get on our soap boxes and proclaim the stock undervalued...But long-term the company should put in a stellar performance. With that said, pay careful attention to the winter drilling program as that will be key to help the stock get to that $10 price target as that is the only news we believe will provide a big enough bang to get us there...well anything short of a JV agreement that is.

Canalaska has been a real poor performer lately and to tell you the truth we are not sure that it is going to get any better soon. In fact, it is our opinion that it is going to get worse before it gets better! This does not mean that we want to sell our shares, or for that matter buy anymore...but we want to hold at this point until we see something really special begin to develop. News is that the company has completed about 3 holes at the West McArthur site, which is next door to Cameco's McArthur River Mine, over the past summer and the stock has taken a plunge lower over that time. Usually when someone hits something or drill cores are seen by the workers, word gets around as to what color(s) may or may not have been seen. Also as many of the other uranium miners bottomed out (we are using a major drop in volume as our final indicator for a bottom here, because that is part of our criteria) Canalaska still has not truly hit rock bottom. When volume begins to dry up (although it might never) that is when it will be time to look for another entry point...BUT NOT BEFORE THAT TIME! Also, we are keeping a watchful eye on the Northeast Project, as we have seen that it has been dramatically pushed up the schedule for exploration and drilling...this could potentially be the next significant drill program carried out by the company.

For our financially capable and investor savy investors, we saw the possibility of a trade open today. URE and SXR both stated today that they had raised significant amounts of cash to carry out exploration...in the field and as they used to say "on the floor of the NYSE" (of course this was in reference to drilling for oil and Cameco is the only pure play uranium company on the NYSE, but you get the idea) as well as building their future mines and mine complexes. With this in mind we believe that SXR could potentially be on the prowl, and although their stock is down right now, doing a cash and stock deal at these low prices might actually make sense for them and the shareholders. Same for URE as their stock is nearer its highs than the rest of the sector, we will credit this to a very focused company that seems to have every cylinder running right now. With companies raising money and a lack of projects to truly put it in...SXR has already lined up financing for its mine due in the 2Q of 2007, we believe that this could be the beginning of the next wave of consolidation and the last month could have been the calm before the storm. Sticking to our guns, we see the possibility of using the run-up in Canwest to our advantage right now and developing a trade using that equity. Margin could be used from Canwest shares to purchase shares of both URE and SXR. However, margin is a very dangerous tool to use, so a safe way would be to use only half the available. For instance, if you had say 100,000 in margin, that would be 50,000 in unmarginable securities...so we would think the safe play is to use only 25,000 and that way you can sustain a correction in Canwest while at the same time hopefully riding your shares in the uranium higher. This is in no way investment advice or a recommendation, simply an idea that hit us which we felt compelled to share as it is a trading tool. Please be responsible and remember not to invest what you cannot afford to lose.

On a closing note, I believe that it was previously stated that the next rise in uranium shares would be in waves, with certain players leading the way then followed by the lesser names. If that was not said, that has been our thinking all along, and the first wave has already begun. Today however we say Pitchstone have a really strong day. It had decent volume which escalated as the day went on with a flurry of decent blocks (keep in mind we are referring to decent blocks relative to this particular stock) coming across the tape at the end of the day. As those blocks passed through, the stock also rose in price closing at its high for the day. We tried to buy during the day but the sellers would not sell to the buyers! Finally this stock appears to have wiped out the sellers and encouraged the buyers to come back in, thus creating a seller's market! This is what creates a bull market, but as we believe we are already in one we think that this will help propel the stock to higher levels in the nearer future than we first thought. One day is not enough to pass judgment, but keep a watch on it and should this continue an opportune area is below C$1.35.