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Posts Tagged ‘relative strength mining stocks’

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Relative Strength Signals Confirm Breakout in U.S. Gold (UXG)

In Stock Movers on June 24, 2010 at 10:59 am

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El Gallo’s story is continuing to impress the mining community.  U.S. Gold has invested a lot of capital into drilling El Gallo this year and believe that by 2013 they can be producing up to 10,000,000 ounces of silver a year plus 35,000 ounces of gold.  This drilling program has been extremely successful.  They have expanded the mineralization and are now showing a potential to connect different zones to have one large shallow open pit mine.  In two weeks the initial resource estimate will be published which should add momentum to this gold and silver growth story.

UXG’s shares have significantly outperformed mining stocks and gold bullion this year.  Since our initial recommendation from last May, UXG is up close to a 100%.

Even though UXG at the moment has little institutional sponsorship other than the CEO himself, I believe the investment community is coming to realize that the company has an impressive growth story.  That has been highlighted technically over the past 12 months.  You are welcome to view archived posts where I have shown the incredible strength these past 6 months.

Since investing in the mining sector since 2001 I have found relative strength to be a key indicator of where capital is flowing.  It is easy to identify which companies are experiencing increasing demand compared to a benchmark.  Since I consider myself a miner of mining stocks, I spend hours researching the mining companies which have the greatest ability to outperform gold bullion and the mining sector.  Even in a great precious metals bull market one can underperform if not aware of how to use technical analysis and relative strength. 

This chart shows the relative strength of UXG to the gold and silver index.  Clearly the breakout to new 52 week highs is confirmed by its bullish strength.  The longer the outperformance of price and the confirmed breakout leads me to believe its growth story going forward. 

Using relative strength one can evaluate if this recent breakout in UXG is sustainable.  The chart above shows a major breakout for UXG confirmed by relative strength.  I believe that this stock can significantly outperform the sector over the next few years as did Goldcorp did from 2001-2005 while Mr. Mcewen was CEO. 

Over the past 6 months UXG has significantly outperformed Mcewen’s former company Goldcorp.  While Goldcorp is up less than 15%, UXG is up close to a 100%.  This further emphasizes how important it is to use relative strength to really profit in precious metals bull market.

Price volume action is excellent highlighted by the big volume breakouts.  I believe UXG is a great long term growth story.  New investors who want to get in should wait for a pullback as it is short term overbought.

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Is Gold In A Bubble? No Way! Classic Cup and Handle Pattern

In Market Analysis on June 11, 2010 at 1:13 pm

On the front page of all the media outlets is the question if gold is in a bubble.  I ride bubbles and look for beginning signs of bubbles.  Bubbles are irrational, but there is an old saying that markets are irrational a lot longer than one can stay solvent.

I believe gold is nowhere near a bubble top and believe now is the time to profit on the next major asset class ready to run through finding the strongest mining stocks in the sector.  I use relative strength to find those companies.

Gold is in a classic cup and handle pattern.  The cup and handle pattern has historically led to major market moves.

You can see by the graph the major breakout from the six month saucer on excellent volume.  Notice how the volume dries up on the handle.  Now I expect a major breakout and a run to $136 on GLD or $1375 an ounce.

Compared to other bubbles gold appears flat.

This a chart of the oil index verse the gold and silver index.  Notice the run in oil before the credit collapse.  This run lasted almost 5 years before it topped.  Meanwhile for the past 15 years the XAU has been relatively flat and yet it has had a nice run we have not seen the run up like other asset class bubbles.

I believe there are signs that we may be moving into a peak gold area and would not be surprised if there is a global rush to gold as investors lose faith in fiat currencies.

The recent collapse of the euro only preludes what will eventually happen with the dollar and treasuries.  Now many people have run from the Euro to dollars, but I believe that is temporary.   Now is the time, before the masses rush in, to buy gold and specifically the strongest mining shares which I highlight here.  This is not the time to be bottom fishing other markets.  I believe to stick to strength.   This chart above gives me the confidence to know that we have not entered bubble territory yet.