This week I will answer your questions on Gold Mining companies and how they have performed vs. the spot price of gold and the general market.
I will answer these questions by designing a price performance chart of the market ($SPX) vs. the price performance of some of the most popular gold mining companies. The mining companies along with their stock signals are; Silver Wheaton-SLW, Goldcorp-GG, Newmont Mining-NEM, Yamana Gold-AUY, and Barrick Gold-ABX.
Let’s jump to real time to answer your question, “How have the Gold Miners performed vs. the price of gold and the general market”? Per the chart you can see the one year price performance for the general market +20.38% ($SPX) has grossly outperformed Gold (-22.25%) and these miners. In addition, while Gold is down the price of these popular miners have taken a beating.
Next, “What would I be watching for buy signals”? I would not be in any hurry to buy these gold mining companies. I would chart each individual company to see when price closes above the trend line and over my blue signal line. In addition, I must see positive money flow and increased buying volume. Until these conditions happen, I would be hesitant about buying these gold miners.
Although things look bleak for these companies, I am very excited about their future. At some point, selling will stop with GOLD and there can be a huge short covering rally possible spiking these companies into very profitable territory. Like I teach in my classes and seminars, I like to sell when the herd buying is peaking and buy when the herd quits selling.
What can we learn from this analysis? If investors held through this downturn many of these stocks may need to double in value before breaking even. That is the danger of being in the wrong sector through dramatic downturns in hopes they will always come back.
Next week, I will be introducing you to the basics of technical analysis and which indicators can give better buy and sell signals. If you want to learn more about Charting (technical analysis), check out my Summer Seminar series going on now.
Plan your work, work your plan and learn to share your harvest!
Source-Stockcharts.com, thetraderseye.com
Full Disclosure-I do not hold any of the securities listed in this column.
DAVID O. ENGLAND is the founder of the Eye on the Market-Training Academy and retired associate professor of finance at John A. Logan College. For questions and seminar info, he can be reached at thetraderseye@gmail.com. The information above is for educational purposes only and is not intended to be financial advice. Your decisions to buy, sell, short, or hold any stock or investment product is a direct result of your own decision, free will, and research.
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