Exposing Ideas to the Envelope of Serendipity

Contact moo at: bluechipbulldog@gmail.com

Monday, May 3, 2010

Mining for Precious Metal Stocks

Precious metal stocks have been on a tear lately, despite a sometimes unfavorable seasonality and a stronger dollar. Call it a flight to safety, a bubble in the making, or gold fever greed, but it seems everyone wants in on the act. To that end, I've scanned, screened, and scoured the mines for you and charted what I consider to be the best charts of the lot. It's hard to narrow it down, of course, but all of these look to have excellent upside potential. Following the charts is a list of other names that I thought were also worthy of consideration but didn't quite make the first team. Nearly all of these are currently short-term over-extended, and you'll note that RSI is in the stratosphere, suggesting that some additional consolidation may be waiting in the wings. That said, stocks in a bull run can stay overbought for some time, and the standard 30:70 RSI oversold: overbought parameters might not be appropriate. Often the best way to join a race already in progress is to scale in gradually -- a little now if you don't think it's quite ready to rest, a little if it pulls back to nearby support, a little more as it heads back up, etc. This method can be very effective for stocks in a clear uptrend with well-defined stops in place and should not be confused with "averaging down," which is nearly always a mistake. In general, it's best to add to a position on the way up, not the reverse.

Without further ado, the candidates are:

Other mining stocks to consider but that I would rank slightly behind those shown above, include ANV, GG, GSS, NG, UXG, LIHR, EXK, NG, NAK, and of course GDX and GDXJ are always fair game, as are GLD and SLV for tracking the moves in the actual metals.

Full disclosure: I am holding GOLD, RGLD, SLW, SA, and IAG in one or more of the accounts I trade at the time of this writing and may initiate new positions in some of the above stocks in the days ahead.

Trade well.

-- Brinkley
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