B.S. in T.A. with a Minor in Miners

157
Sat, Aug 20, 2011 - 3:46pm

I don't know about you, but I'm beginning to feel an instinctual pull toward the miners. They have beaten down for so long that they finally just feel like they're ready to go higher. My gut tells me that, having reached a point where their relative valuation versus metal is several standard deviations away from normal (whatever that is), something is bound to happen. My brain tells me that prices, some of which have fallen all the way back to pre-QE2 levels, are bound to turn around soon. So, let's take a look.

Any discussion of the miners must begin with a look at the overall stock market because, at the end of the day, these are stocks we are talking about. Unfortunately for our bullish case, the S&P looks downright awful. Though fundos for most miners are improving with every uptick in the PMs, a falling stock market makes buying miners a bit like rowing upstream and a swift current can wash you away no matter how hard you are paddling.

That said, the HUI (gold miners index) doesn't look too bad. In fact, its at a point where it appears to be breaking higher. We'll know more in a week or so but, for now, keep a close eye on the 580 level. If the HUI can stay above there, base and move higher, it will create a favorable environment for most all of the mining stocks, regardless of their current technical picture.

Now, here's the kind of stock we're looking for. Note how Yamana struggled for the longest time to get through 13. Each time it tried and failed, the shorts were emboldened and more certainly joined the cause. Ah, but look what happened once it broke through 13! It based and used 13 as support before igniting a short squeeze that has driven it to 15.50. Pretty good stuff.

So, what we want to find are stocks that look like AUY but haven't broken through and taken off...yet. Below are four candidates. If the HUI holds 580 next week and you end up looking for a miner to buy, I'd start with these four or any other stock that has a similar-looking chart.

Now here are four that don't look so good. You can certainly nibble at these if you want and I'm not sure I would sell them yet if I'd ridden them all of the way down. However, if you're looking to buy, I'd stay away from these and any others you find that look the same.

Time prohibits me from giving you more charts but I think you get the picture. If you're interested in a stock not mentioned above, pull up a chart yourself. I think you'll find that it either looks like the first group or the second and it will then be clear to you whether or not it is something to consider buying.

If all else fails, just daytrade the UGL and the AGQ. Mister Hyde gave up on the miners about 8 weeks ago and has been trading these two ETFs exclusively ever since. He's made about 30% and is feeling quite pleased with himself. A word of warning, though. UGL and AGQ...particularly AGQ...are quite volatile and not for everybody, particularly the faint of heart. If you don't like the heat, don't go anywhere near the kitchen. In fact, stay out of the house completely.

In time, a portfolio of miners will treat you just fine. A little patience and a little homework will take you a long way. Good luck! TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  157 Comments

Two Gun Tobin
Aug 20, 2011 - 3:56pm

No Way

First?

silverbleve
Aug 20, 2011 - 3:58pm

Great stuff

Thanks turd, I'm Definatley not going in the kitchen yet, I'll leave it to the real chefs. go pm's!

silverbleve
Aug 20, 2011 - 3:58pm

Doh

Duplicate post

Tesla
Aug 20, 2011 - 4:01pm

Thanks For EVERYTHING Turd!!!

Your a ROCK STAR - have a great weekend man!

Invisible Hand
Aug 20, 2011 - 4:06pm

Thanks Turd!

I appreciate the update on the miners. This is exactly what I was looking for. Thank you!

ewc58
Aug 20, 2011 - 4:22pm

Turd, totally agree with all the ones you wouldn't touch

And I'm loving that I don't own any. I do think Kinross belongs in the first group, any thoughts there? If EGO does, I think KGC does. But I am not the Turd. Had you ruled it our or just didn't look at it?

Thank you

thecoloredsky
Aug 20, 2011 - 4:33pm

New Gold looks like it

New Gold looks like it belongs in that upper group. Been watching it off and on, don't own any though.

1 year Yahoo chart:

https://finance.yahoo.com/echarts?s=NGD+Interactive#chart1:symbol=ngd;ra...

Dave T
Aug 20, 2011 - 4:35pm

GLD

From the last thread: "... So be careful when you denounce GLD as a scam! You are playing into the hands of the same crew who rob us in the gold and silver markets at every opportunity...."

I liked the whole post, but, instead of doing battle with an 800 lb. gorilla I’d rather be running right behind that gorilla in the same direction he’s going. Would help to know which way he’s running though. GLD will de-couple from the spot price of gold some day and it would be wise of everyone to realize that. What we don’t know though is when it will happen. I hope no time soon. I’m enjoying the ride thus far. But I try to keep the blinders off and remind myself that a quick exit will be in store someday.

The only GLD I hold right now is in Options contracts - long calls and bull put spreads. My long term gold is physical holdings and in Sprott's PHYS.

Jim H
Aug 20, 2011 - 4:39pm

What about a lens other than technical chart analysis?

Certainly the Turd's chart reading skills are legendary... but I am drawn to a more fundamental-based view as well, in which case PAAS looks to me like a pure value play;

PE = 11

EPS = 2.77

Div (yes, there is a small Div.. which makes it a bit harder to short) = 0.3%

I would be interested in hearing other opinions on PAAS and miners in general.. Thanks!

I hold USSIF.PK, HL (it has sucked wind big time), and EXK. Bought into PAAS last week based on above.

mouser
Aug 20, 2011 - 4:46pm

Turd i hope you are referring to SVM from a TA standpoint

From a fundamental look they are likely one of the best buys in the silver producer space. What is not to like ? Outside of the chart...

First off, fundamentals.... SVM is the lowest cost primary silver producer on the planet. Lead and zinc revenues more than pay all mining costs.In the First Quarter of FY2012 (ended June 30, 2011), the company produced 1.6 million ounces of silver at a cash cost of negative $6.12 per ounce.

SVM totally unhedged, so will enjoy the full upside of the silver move over 50$ US.

SVM is debt free and sitting on over 200 million $ , and this while getting two more mines into production, and are actively buying back stock around 8$. Remember too they did a 116 million $ PP at 12.70 in december. Nice work if you can get it, sell at 12.70 and buyback at 8$ or so, while reporting record revenues and profits.

SVM pays a divvy of .02 a share , and this puts a real downer on shorting the stock.

Growth? Hard to find another silver miner who is growing any faster.

Recently SVM brought the BYP gold mine online, cant see how that could be a negative in this current metals environment.

By end of 2013 the production at BYP is slated to be 1000 ton per day gold and an additional 1000 ton per day lead and zinc.

Currently just 400 ton per day gold production at about 7 gpt AU average , and costs under 200$ per oz.

GC mine slated to come online with Initial production of 700 tonnes per day mining capacity is expected to be achieved in about 9 months with full capacity of 1,500 tonnes per day to be achieved in 15 months. With the added growth from BYP and GC , you can estimate double the revenues within 18 months, and that is with silver at 35$ , gold at 1500$ and lead and zinc a buck a lb average. The cost of bringing these 2 mines online is of course a fraction of what those costs would be in North America. One of the competitive advantages of CHINA is the speed and lowcost of construction in China.

There are downfalls of course, and most of SVM's beatdown i believe can be attributed to TRE scam allegations, which has created a hateon in the NYSE for big China based companies. Lots of disinformation of course being distributed about SVM by some firms ( Cramer 's The Street) who claimed costs were going up and poor growth for SVM. They of course used the Q ended March 31 in which Chinese new year happens, and SVM takes a month off for holidays. The next Q of course recently reported was much, much stronger with a full 3 months of production.

2011-08-03 04:40 PT - News Release

Mr. Rui Feng reports

SILVERCORP REPORTS NET INCOME UP 82% TO $25.6 MILLION OR $0.15 PER SHARE AND CASH FLOW UP 46% TO $33.9 MILLION OR $0.19 PER SHARE FOR 1ST QUARTER OF FISCAL 2012

Disclosure , I am a buyer here, SVM is also a buyer around 8 $ and change , so i see little downside from here as SVM still has near 100 million $ set aside for the buyback. This of course is the opposite of dilution and earnings per share will only go up with less shares OS, so less divvy payments and higher silver and gold prices and production.

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Recent Comments

by It'stheBankers, Aug 24, 2019 - 10:04pm
by jack3617, Aug 24, 2019 - 9:04pm
by Marcus, Aug 24, 2019 - 8:58pm
by mavens, Aug 24, 2019 - 7:15pm
randomness