Mining for Winners in Any Market

Posts Tagged ‘50 day moving average’

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Silver Breaks Downtrend, Junior Miners Outperforming Majors

In Featured Company News, Market Analysis on January 22, 2012 at 3:49 am

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On January 3, 2012 I wrote to my readers that silver would begin outperforming gold similar to what we saw in 2010.  On Friday we saw a major gain in silver of close to 5%, breaking the 50 day moving average for the first time since the Operation Twist decline in September.  This was an attempt by the Federal Reserve to manipulate commodity prices lower while artificially inflating U.S. dollars and bonds.  It appears that this temporary fix may be reversing to the benefit of undervalued junior miners of both precious and industrial metals.

On January 3rd, 2012 Barron’s wrote an article based on the premium report I sent to subscribers.

“Silver has corrected by roughly 50% from its highs, while gold has fallen less than 20%, Gold Stock Trades’ Jeb Handwerger reminded clients on Tuesday. He traced much of the previous downward move in precious metals to the fluctuations in the U.S. dollar. An index comparing the greenback to a basket of other major currencies was at last glance down 0.7% on the day at a 79.63 valuation. The ICE U.S. Dollar Index touched its lowest level since Dec. 21.

“The U.S. dollar is reaching key resistance at 81, while gold, silver and the miners test support at oversold conditions indicative of a major rebound move,” Handwerger said in an interview. “In addition, silver — which up to now has been an orphaned child — is making up for lost time outpacing gold and equities.”

Big end-of-year bets against gold and silver by speculators are likely to start reversing as managers try to cover their short positions, he believes. That should fuel an even more expansive run, says Handwerger, who has been cautious on silver since April and gold since September.

He changed his tone considerably Tuesday:

“We could be setting up for the biggest move in precious metals and miners during this 10-year bull market run.”

Handwerger is now viewing silver — with duel roles as an industrial and precious metal — as especially well-positioned for an upturn as manufacturing demand picks up.

“Silver has a much bigger upside than gold at this point in the cycle,” Handwerger said. He added:

“This market looks to be setting up a lot like what we saw between August 2010 and April 2011 when spot silver prices jumped 177% an ounce, strongly surpassing gold’s 58% rise in that same period.”

Silver, which has more industrial uses than gold, jumped Tuesday on stronger manufacturing data from India and China, which are leading consumers of precious metals. Silver for March delivery rose 5.9% to settle at $29.57 an ounce, continuing a rebound after futures last week touched their lowest levels in 13 months. February gold, the most active contract on the Comex, rose 2.2% to settle at $1,600.50 an ounce.

Meanwhile, Handwerger figures that the so-called January Effect — in which stocks get a boost from investors and managers refreshing their portfolios at the start of a new year — could be another underlying factor fueling miners. He noted that small-caps in particular seem to get a bump during this time of year (averaging around 4.4% over the past 32 years), which could bode well for GDXJ.

“Today, the junior miners are off to the races, outperforming the larger gold miners and moreover surpassing bullion,” Handwerger observed.”

Read the full article at Barron’s by clicking here…

On another note, the Euro is sinking into new lows, which has benefitted the dollar momentarily.  Paradoxically, a cheap Euro attracts foreign capital seeking to acquire European natural resource assets inexpensively.  We have witnessed the acquisition by Eldorado Gold (EGO) of the Greek European Goldfields as well as the recent $150 million merger between Astur Gold and Gold Ore Resources.  This indicates that European mining is gaining attention and moving in the right direction.

One company we have featured is sitting on a very attractive asset in mining friendly Spain, which is desperate for jobs and mines.  We believe that 2012 may be a significant year for this company which is only valued at $30 million!  As they advance a full feasibility on the project, major miners may gain interest to enter an undervalued European mining asset as Eldorado did in Greece.

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Healthy Correction for Gold Miners, Precious Metals in Secular Bull Market

In Market Analysis, Stock Movers on February 17, 2011 at 9:13 pm

One of the most difficult decisions an investor must make is to determine if a turning point is of short-term or long-term consequence. The markets give subtle clues to students of the market of impeding danger and times of caution. A stock’s reaction to news may tell us the authentic underlying strength. In November and December, gold, silver and mining stocks sold off on China raising rates and now in February they shrug off the news. Is that telling us the correction may be over? A break above the 50-day moving average will bring back the previous gold run. Often times in a secular uptrend news items are planted, causing short-term shakeouts, which often in retrospect are great buying opportunities. I have learned over time it is important to look at a long-term weekly chart and review the trend. If the trend is a normal healthy linear trend then most times a correction becomes a major buying opportunity.

Gold miners have put in a short-term bottom under $53. A cross above the 10-week or 50-day moving average on volume could forewarn of a break into new highs. After touching support and reaching oversold levels, traders entered the secular bull trend. Mining executives and fund managers believe gold and silver are in a long-term bull market. Many of these precious metal majors are sitting on huge amounts of cash and may become the new income stocks as they increase dividends to shareholders in 2011. The large miners are undervalued relative to other sectors and may have a strong 2011 as their profit margins increase. I expect new highs for the large producers and for them to outperform.

Gold ETF Chart

Gold has bounced at my previous buy signal under $130 and has reached a short-term overbought condition after reaching multi-year oversold levels. The first bounce after a significant correction may push stochastics into extremes and should be given less importance. I believed gold at under $130 or $1325 spot was an ideal buy as it reached long-term support and oversold levels.

We must remember that gold is in a secular uptrend and these trends must be given strong weight when making decisions. I believe gold will reach new highs as central banks will be reluctant to raise interest rates in light of high unemployment and mounting debt fears. I expect further debt issues to resurface globally and for investors to seek out real money — gold and silver. Look for gold to hold the 50-day moving average, pushing a lot of bears who were expecting a steeper correction back into gold, causing it to reach new highs.

Using a simple set of trend channels one can assess the risk at key market turning points. For four months, while investors were chasing gold at resistance, I was writing about key sectors and stocks that doubled, especially in uranium and molybdenum. Many investors left precious metals for riskier assets in energy, rare earths and base metals. Now gold and precious metal mining stocks seem to have found support and are making a leg higher despite fears of rising rates in both the US and China to combat rising prices of basic goods and commodities. Investors are realizing that interest rates won’t deter this economy on steroids. President Obama does not appear to be cutting spending as our deficits soar into record territory and we may be setting ourselves up for QE3 if yields continue rising.

Look at this video from January 29th where I predicted precious metal prices would reverse and turn higher.

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Using Oscillators To Time Stock Trades

In Market Analysis on July 15, 2010 at 5:45 pm

Fears of far-reaching government oversight in the financial industry and weak economic data coming out of Philadelphia are contributing to today’s modest decline in the market.  Many fear that this bill will hurt the financial sector as more government oversight is required.  The bank bill implies that the government can have access to control banks when they are in a vulnerable situation.

Weak economic data from Philadelphia also disappointed analysts.  I am concerned that the same people who termed “too big to fail” and bailed out these big banks causing huge amounts of debt for future generations are designing the legislation to “prevent” it in the future.

These last few weeks I have been warning subscribers about this decline and the possibility of a major drop following the very bearish death cross.  For timely updates and specific recommendation please subscribe to my free newsletter at my website at http://goldstocktrades.com.

After a six day rally U.S. equities became quite overbought.  I use oscillators to time market entry.  Oscillators are used to identify short term market extremes.  If the trend is moving lower, I will use the oscillator to tell me when the market is overbought for a short entry point.  The recent market bounce with six straight up days gave extremely overbought readings.  This means this recent rally went too far too fast.

The indexes now have downward sloping 50 day and a flattening 200 day moving average.  Poor price volume action continues to plague this market as the rally has been on low volume which shows a lack of support from institutional investors.  The slope of the 200 day moving average turning negative will confirm the death cross and a failure to break through the 200 day and continued weakness will be another bearish confirmation.

Yesterday, those overbought conditions were signaled and it coincided with the Dow reaching the 200 day moving average.  Today’s downward reversal from the 200 day is indicating that this counter-trend rally is completing.  Traders might want to think of going short at this point as most traders who were shorting when the index broke to new lows have covered.  It is also an opportunity to move to cash if you still have long positions.

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Shorting Stocks Explained: 50 Day Crossing 200 Day Moving Average Signals Major Market Drop

In Market Analysis on July 8, 2010 at 12:41 am

These past few days as the market indices broke through the head and shoulders neckline, I have had a barrage of emails asking if it was too late to buy inverse etf’s after my original short sell recommendation on June 21st 2010 .

My response to many readers is that if it is apparent to everyone to short that is the time to cover.  It is dangerous to short when stocks are going into new lows as often time there are powerful dead cat bounces where covering takes place.

No one knows how to sell at the top or buy at the bottom.  The only person who knows that is a liar. Often at tops every chart looks bullish, earnings are fantastic and every newsletter writer is bullish with new price objectives.  Similarly at market bottoms charts look awful, stocks are experiencing losses and every newsletter writer is telling you to run for the hills.  Be aware of the obvious because when it is evident to everyone that is when you have to be contrary to the market crowd.

Last week everyone was buying puts and shorting the market when it was an obvious head and shoulders pattern with a very bearish declining neckline.  The slope of the neckline determines the bearishness of the pattern.  It is important not to short when it is obvious and breaks the neckline.  I look at key areas to short on counter rallies.  Price volume action is very poor and I expect a few more days as it rallies to the resistance trendline and 50 day moving averages for additional short sale points.

The goal of a trader is to find key areas of support to buy when the stock is moving up and specific points of resistance to sell short.  Markets don’t top or bottom in a day.  Often there are several signals to show that a market trend is changing.  During those times there are often major counter trend rallies to shakeout the weak or inexperienced short  traders who bought as the index dropped into new lows.

The cross of the 50 day and 200 day is called the cross of death for a reason quite often there is a major break to the downside over the next few weeks.

This past week as many analysts and publishers recommended to go short as the index broke the neckline of the head and shoulders pattern.  I disagreed.  I would definitely not recommend shorting into new lows but shorting at the end of a counter trend rally or where there is overhead supply where many investors want to get out.

If you are looking for possible points to go short stay tuned over the next few days as I will be sending out an alert to free subscribers.