Miner In Possession?

132
Thu, Jan 23, 2014 - 11:26am

Of the more encouraging signs since the first of the year has been the UPtick in the HUI and most of the mining stocks. Is this just a blip or are we in the early stages of a reversal and rally? And if we have found The Bottom in the shares, which ones should we consider possessing as the rally continues? C'mon in. Let's take a look.

First, some history and a reminder. Through all of 2013, I was NOT a fan of the mining stocks. I wrote this post in early January of last year:

https://www.tfmetalsreport.com/blog/4424/miner-case-depression

That column concluded with this "warning":

"So, what's the point of all this? Why even jack around with these damn things? Just buy physical metal, take delivery and forget about it. And don't tell me about your IRA. There are plenty of companies out there that can help you to buy bullion within that thing, too.

Stack, stack, stack and BTFD. Your only winning move."

Back then, the HUI was near 450. By December, it had bottomed(?) near 190. YIKES!

But, below 200, I thought that the HUI was starting to look interesting. I posted the chart below back on December 2 and noted that the index was approaching levels last seen in 2008 and 2004!

So, with this index having fallen to its lowest level in ten years, things began to look interesting. Were we seeing a washout? Was "tax-loss selling" in December the key to the final washout? The price action in early January should tell the tale and perhaps it has. Since late December, the HUI has rallied over 10% and, on Friday, convincingly broke through and closed above its 50-day moving average. This is another bullish, short-term signal and likely sets up an extension toward the 100-day near 220 and the 200-day near 240.

A run to the 200-day would mean another 10% from here so there's still time to make a little fiat for those willing to "jack around with these damn things". So, below are updated charts for 13 of the miners that we have followed since this site began over three years ago.

Interestingly, six of these have rallied considerably and, in doing so, have already broken through their own, individual 200-day moving averages. This is very bullish signal for these stocks. NOT so bullish that you sell metal and buy them or plow all of your remaining fiat into them...BUT...bullish enough that, on weakness and dips, you may be able to accumulate a little at a time and, eventually, make some fiat currency which you can convert into physical metal at a later date.

Let's break these into groups. These first three broke through their 200-days a couple of weeks ago and have continued to rally. For StevenBHorse, let's start with SSRI. If it can break through and close above $8.40, it looks to be headed to $10 before pausing and consolidating:

Looking similar is PAAS, which looks almost certain to be headed to $14:

And then there's NG, which looks like $3.50 BUT beware of the false breakout, like it had back in late August:

The next three look quite bullish, too, but they only just broke through their 200-day MAs back on Friday. This means they are subject to a pullback which could drop them back below the 200-day, at least for a short time. Watch these three closely as the may merit the best short-term opportunity should a dip develop.

Let's start with EXK, which looks like it could easily rally another 25-35%, toward $5.25 or even $5.50:

Then there's HL, which looks to head from $3.25 to $3.50 to $4.00:

And AEM, which looks like $32 and maybe $34:

OK. It's halftime. For your halftime festivities, I give you SLW. Why? Well, it's not really a miner per se. It's really more like a proxy for the price of silver. Note that it's share price is often very close to the cost of silver by the ounce. It got way ahead of itself back during the rally of late last summer when it reached all the way to $29. Is it getting ahead now? Maybe. Perhaps, instead, at $22+ it is signaling a further rally in silver to come. Let's hope so.

Now back to the action with our second group of six charts. First, here's EGO, which is about to run into some stout resistance near $7:

Poor, old SVM...the victim of malicious hedge fund selling...is about to have some trouble near $2.90:

And AUY, which has the potential to move toward $12 but has to get through considerable resistance around $10 first:

Finally, here are the final three. All of them are still considerably below their 200-day MAs so I would avoid them for now. But keep an eye on them, though. There may still come a time for accumulation.

First, here's GG, the only "major" that I follow. Like the other larger-cap miners, it may continue to struggle as it adds/buys other juniors and exploration companies. This dilutes the share base and tends to keep a lid on price, at least in the near-term:

GOLD has long been a nice proxy for the price of gold and you can see it in this chart. Let's keep an eye on it, much like we do SLW:

And, finally, here's Santa's company, TRX. It has been savagely beaten by folks seemingly determined to disparage both him and his company. As you might imagine, this doesn't surprise or bother me in the least and I continue to own it, if only for the quarterly reports and the annual invitation to the shareholder meeting which, one of these days, I'm going to attend:

OK, that's it. I close with a word of caution...

All I've done here is give you some charts. Before buying ANY of these, you must do your own due diligence including a look at each companies cash situation, its book value, its debt level, etc. And, if you decide to buy one or two, be prepared for extreme volatility which may require you to do some dollar-cost averaging. That said, it does appear that we may have finally found The Bottom in this drawn out and painful decline. Invest accordingly.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  132 Comments

Jan 20, 2014 - 12:10pm

And I should add...

DO NOT BE SURPRISED by a pullback in the HUI and all of these stocks on Tuesday and/or Wednesday.

The HUI shot through its 50-day back on Friday and will likely test it as support early this week. The same goes for the individual miners which just broke through their 200-days on Friday. Watch for a pullback and see if the MA, which was resistance, can now hold as support.

Your best short-term buying opportunity may come as these pullbacks happen. Keep your eyes peeled!

ag1969
Jan 20, 2014 - 12:18pm

First

Just wanted to let everyone know I have started a new forum about healthy food and healthy living. My lovely wife will be joining us there as well, although she is having trouble getting signed up and can't comment.

https://www.tfmetalsreport.com/forum/5410/healthy-food-and-healthy-living

The First Amendment in Five Minutes
mike97
Jan 20, 2014 - 12:22pm

Second

Don't forget the silver miners - First Majestic, MAG Silver and Silvercrest.

mike97
Jan 20, 2014 - 12:26pm

By all means

Please feel free to make suggestions and add your own charts.

wildstylechef
Jan 20, 2014 - 12:43pm

turd

Turd what's your take on the ridiculous VIX in the options market where it sits at sub 14% and as gold moves up so does the Vix. Not that this is doing anything new.

Gamble
Jan 20, 2014 - 12:46pm

Detour gold

Up 7.77% today and over 30% when I bought it end of dec

$6.66 but has a 52 week high of 24.08?

why do I even bother
Jan 20, 2014 - 12:53pm

Is this an Urban Myth, or evidence of complete bullshit?

In trying to research the collapse of the London Gold Pool in 1968 I have come across multiple references to emergency trans-Atlantic airlifts of Gold during the second week of March; presumably, these were organised at fairly short notice and, given that the Pool had lost over 1,000 tons the previous week, in significant volume

see e.g. https://www.anglofareast.com/archive/0139.html and https://www.time.com/time/magazine/article/0,9171,828523-1,00.html and https://www.mauldineconomics.com/ttmygh/twisted-by-the-pool

Maybe these are just rumours, maybe they actually happened (does anyone have any reliable information?), but either way the repeated changes in the ongoing story of German gold repatriation and the lame-ass excuses about why only 5 tons made it back in 2013 are hardly credible.

Similarly, looking at that photo of the odd-sized and misshapen bars allegedly returned to Germany, and then comparing that to the neatly-stacked and sequentially-numbered bars in the video really takes the Bundesbank's recent statement beyond the bounds of plausibility. Maybe they really didn't think we are that stupid - maybe they just don't care what we think

Anyhow, the one wry remark which I thought was especially amusing - and, who knows, maybe even to some extent true - was that the reason Germany only got 5 tons when it was expecting 40 from the Feds was that, when the 40 tons were smelted down into LGD bars, that's all the Gold there was left - the other 35 tons was probably Tungsten! Stranger things have happened (and Zerohedge recently republished the secret Memo from the Bank of England agreeing with the Feds "not to mention ze War" - oops! - not to mention that the bars supplied previously were sub-standard)

Frankly, I think we all know this stinks, and the Feds simply haven't got any Gold - German or otherwise. The whole smelting/logistics farce is just the Fat Lady singing - the charade entered its final act the minute the German Federal Court of Auditors decided to call the Feds' bluff and demand their Gold back; they knew damned well it wasn't there, that's why they asked for it back. In years to come this will be seen as the tipping point (or watershed) in the Western financial and monetary system, and that fact that the Chinese are now strolling onto the battlefield after the event and opportunistically bayonetting the fallen is little more than background music. I don't sense an international conspiracy and fiendish collusion between East and West, I suspect good old-fashioned theft, plain & simple. Don't expect anyone to be held to account any time soon; in fact, Bonuses & Cushy Jobs All Round!

SteveW
Jan 20, 2014 - 1:00pm

Sprott silver trust

is ahead 5.45% right now in Toronto, PHS.U-T on the TSE. The silver companion to CEF namely SBT.UN-T is also ahead 4% while spot silver is basically unchanged. Sprott reported a 1.7% premium on Friday while SBT was at 10% discount!

Trading is very thin but if this holds the premium on Sprott will be enough for another offering.

The move this past two weeks in both the silver and gold miners in my retirement portfolio, that are badly underwater, has been very encouraging.

EDIT: Sprott now ahead 0.5%, so it was simply someone who got shafted in a thin market.

tmosley
Jan 20, 2014 - 1:08pm

Miners

No thanks. Too much risk. Silver is below the cost of production, meaning everyone is going out of business. Silver may be declared a strategic asset, and the mines nationalized (or just get nationalized because f*** you capitalist swine). Energy is most likely going to keep rising, even if the metals don't. Etc etc.

No, better to stay in the physical PMs, which are already levered god knows how much by now (certainly more than the previously cited 100x). Trying to get more leverage than that is just greedy and not fearful enough given all this risk.

It might be good for Vegas money, but that is a concept that is long gone for many of us.

Avoid the siren song, even if the HUI falls to $1. Bankruptcy or government seizure of the whole complex is just too likely, especially in the even of a COMEX failure, where they will briefly have huge profits before butthurt pols and central bankers send in the thugs.

StevenBHorse
Jan 20, 2014 - 1:11pm

Thanks for the shout-out boss.

Even the ass clowns are starting to show some life.

Full disclosure: I hate the management of this country more than owners of glue factories. By extension I have no interest in GDX because ABX is the largest component.

ABX CEO: I have a wonderful idea, let's build a fucking mine at an elevation 12,000 ft. on top of a glacier.

ABX BoD: BRILLIANT!!!

The point being here is that sentiment has finally bottomed, and even this piece of shit is finding willing buyers of the glacier mine. I like SLW, but I fear their exposure to ABX via the glacier mine. I would feel loads better if SLW put some of their cash to work in better projects. They should be out there stealing production from cash starved mid tiers.

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