Wednesday, January 19, 2011

A Little HUI On The Side

I've been waiting to drop this on you. Trying to be patient. Finally I think its time.

The primary index of mining shares is known as the HUI, or "The Gold Bugs Index". (There's that name again.) Though the index has been in a sustained uptrend, it has its peaks and valleys. The key to trading the miners is to invest and unvest and highs and lows. Not an easy task but not necessarily impossible, either. I've been watching the HUI since the selloff that started two weeks ago, waiting and wondering if it would reach down near the primary trendline., near the 510 level Well, guess what? It has. Tonight, the index sits at 517.43.
Isn't this an interesting chart. Almost all the classic TA formations are here. H&S tops, double tops, double bottoms, rising wedges...just about anything you want to see you can find it on this chart.
Now, look very closely. In May and June of last year, you got an almost perfect double-top. This was followed by a correction back to the primary trendline at about 435. From there, the index rallied almost 35% over the next four months! Now note the almost perfect H&S top from early November to late December and, most importantly, note that we have now pulled back almost entirely to the primary trendline again, near the 510 level.

So, here's the deal, its time to aggressively buy the miner's again. Period. Only if the index continues downward and closes below 480 would I stop myself back out. Until then, buy with both hands. Buy what, you ask? Well, my opinion has not changed on any of my five favorites. You can find them here as well as picks in other areas: http://tfmetalsreport.blogspot.com/2010/11/this-might-take-minute.html
Actually, you should take a minute to read the entire post from late November. Note how the USDX was at 81 then yet gold was higher than it is tonight. Hmmmm. Nah, there's no manipulation in the gold pit. Anyway, I digress.
Let's revisit my Fab Five and maybe pick some price entry points for tomorrow, later this week or whenever you are comfortable taking the plunge.

EGO: Anywhere around or under $17, it would appear to be a steal. Stop below 16.50.
http://finance.yahoo.com/q?s=EGO

TRE: If you can get it at $6.50 or less, I think you'll make money.
http://finance.yahoo.com/q?s=TRE&ql=1

NG: $13.50-14.00 is a great price and its a possible takeover candidate, too.
http://finance.yahoo.com/q?s=ng&ql=1

SVM: Came down rather dramatically, mainly because of a secondary offering. I've been waiting for the chance to buy it near $10.50.
http://finance.yahoo.com/q?s=SVM

EXK: My personal favorite. Do your own research and I think you'll agree. At $6, its a great buy. At $6.50, its a great buy. At $7, its a great buy...
http://finance.yahoo.com/q?s=EXK

Lastly, I would be remiss if I didn't offer you another chart of the USDX. Again, here's the long-term, 12-hour chart I posted a few hours ago:
Now look at the short-term, 1-hour chart. Looks pretty dismal but also looks like we'll soon find out if its headed significantly lower or if its going to rebound.
Recent history would suggest a rebound. Some manufactured "news" of more EU contagion or some such. But we'll see. A move down through 78.40 would set off a bunch of stops and we could reach all the way down to 77 before stabilizing. Watch this very closely.
And here is Trader Dan discussing many of the very same issues we've been following today. He even touches upon the HUI. As usual, its a must read: http://jsmineset.com/2011/01/19/trader-dan-comments-on-todays-sobering-dollar-action-2/

I'll post more later if conditions warrant. Turd out.

76 comments:

  1. What, no love for Hecla (HL)?

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  2. For those who want leverage they could buy options on miners as well. I don't follow individual miners personally so a safer play would be options on GDX or GDJX. I believe GDX is pretty close to the HUI so that might fit better with your thesis.

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  3. Thanks Mr T!

    As always you do a hell of a great TA.

    I like all your pics. I just picked up FRG at 10.14. I too own HL, very nice no debt miner.

    I'm very excited about QNMNF.
    I own 3000 shares and I am a long term guy here. I look at the macro and love the alpha I see in time and value.

    AEM just bought almost %12 of QNMNF.
    Very nice exploration moving into a miner in the next two years.


    I too have your view of gold as a long term hedge. Thanks for all you do.

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  4. I follow miners and I believe junior speculative miners will be the most beneficial. I have made 76% returns in about 4 months, and I think the bigger days are coming...

    Silver miners have a lot of %tile ground to make up... since pure silver plays have either been waiting by choice or by lack of financing. Gold is already a profitable mining industry, straight silver is about to be very very very big in my opinion as well (as most of the silver we get today is from copper/gold mine runoff).

    Junior silver miners with lots of resources (and junior gold miners too) that have great management and COMPLETELY undervalued speculative stocks should be looked at, as the potential here is astounding in a PHYSICAL shortage supply. After all, the market will have to turn to somewhere to get the physical, I am sure glad I am in diversified in this sector.

    Read about my personal strategies for junior miners @ my log (being updated, could use some advice on the formatting and content to be delivered...)

    http://thehardrightedge.com/2011/01/12/my-investment-journal/

    Hedge yourself against what Turd refers so accurately as...

    "The End of the Great Keynesian Experiment"
    -
    Scott J

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  5. wtf yahoo shows EXK up 5% afterhours, is that right?

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  6. thanks for the post Turd. am looking for entry positions specifically in Canadian silver miners to hold for the next several months. Metal stocks have taken a hammering compared to the equities I am looking to sell so it is very tempting to offload them asap and start nibbling this week.

    Scott, i agree with your prognosis on undervalued silver stocks. With the physical market being so tight and seeming to get tighter by the minute, there could be a lot of short-term upside in many of these names. The only risk I see is a broader equity market sell-off in the near future. It would be interesting to see how commodity related stocks fare in that scenario. Methinks there is a plenty of 'smart money' waiting for exactly that oppurtunity.

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  7. Thanks TA.. ..I am particularly interested in the miners as my finances are limited and I'm not able to acquire as much physical as I'd like. Buying the junior miners for me in a manner of speaking is a way to 'get more silver' because I'm betting that these stocks (if chosen well) will do extremely over the long haul. And though I'm not actually accumulating silver when I buy a miner.. I'm buying into a company that hopefully will be heavily vested in silver if their exploration and production goes well.

    1 question for you though. You said that the key to buying the miners is to invest and unvest the highs and lows. I have not done that. Am I making a mistake? Wouldn't one do well over the long term by simply buying a miner and going long knowing that silver is only headed upward? ...Maybe I need to look at buying and selling and buying shares back again.. but honestly.. that makes me nervous as I'm not a trader. How do you think we will do if we simply stay in our miners.. highs and lows be damned. Is that extremely naieve ..dangerous?? I know I stand to lose my investment but I think I've chosen wisely. ....That being said.. anyone here have an opinion on Silvermex Resources? (GGCRF). I think this is one junior that is going to do very well. Their management team has a fantastic track record (from Hecla) and a strong balance sheet. I would be interested to know what others might think of this company as they are one of my favorite miners.

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  8. My silver plays I keep hawking are SLW SSRI HL....gold..EGO GFI ANV....ANV in particular has appeared to be bottoming......gl

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  9. Take a look at Arian Silver Corp. I bought it on 11/08/10 at.41c today it is at .78 even after this down time. About 90% over that time.

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  10. The symbol is ASLRF for Arian

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  11. to be realistic about this current global situation (there's no where to run..south america? too much planning, not enough time IMHO) and to actually live through the slow motion wreck is fucking depressing..makes you wanna shed a lil tear..fuck it..onwards and upwards..

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  12. I'm all physical on silver. Also very small player. I think I know the basic law of supply and demand. But all of this is insane. All of this is great as far as concentrating the mind in Samuel Johnson's words. WTF has the USA put it's foot on the first of 13 steps?

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  13. @RightIsRight. I own Silvermex from .43, just before the merger with Genco. A good marriage with both companies getting some of what they needed. Mr. Market liked it. Having Sprott on board since November/December is a definite plus also.

    After a few days of red, tentative bargain hunters have bid-up most of my Jr's...both yesterday and again today. Are they premature ?

    With companies that are performing, or that I believe will perform, I try to hold approx 2/3 of my shares as a core position, and trade the volatility with the balance.

    GL RIR

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  14. I'm thinking about shifting out of the general stock market (I find I'm overwhelmend by the number of variables and information that impacts some of these stocks) and back into the miners....but it seems like the miners do best when both the metals price is going up (duh) and when the overall stock market is roaring upwards....would it be wise to wait out the potential sideways movement of PMs and also wait for the general market to re-establish as a definite bull market before loading up on mining stocks?

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  15. I am long EXK and TRE, but my favorite is AG. The strengths of this company are phenomenal! A few of them are: 2010 produced over 7 mil/ag. eq. oz. (of which 6.5 mil/oz. were pure silver (meaning total silver production as a percentage of total production amounted to 93%, making First Majestic the purest silver company in the world). This was 72% production growth from 2009. They exceeded production estimates by 9%. Next year looks even better with 7.5 mil./oz ag and 9.0 mil/ag eq/oz projected in 2011. Their total reserves are 350 million oz. silver and have the best chance of any mid size producer to make the leap to major producer (15-20 mil. oz/yr.) They have over 47,000 meters of drilling for 2011 (which will significantly increase reserves), the BEST management in the business, solid share structure, no debt, and three weeks ago moved to the NYSE big board (not the AMEX). And lastly, their market cap is still a paltry 1.1 billion. Their PE is half of EXK and their growth is much greater.

    I haven’t been much of a chart reader (which is why I love your site…it’s been so educational), but I’ve done very, very well on researching and picking mining stocks (was buying thousands of shares of GORO at $2 - now $27, NAK at $5 - now $18, AG at $6 – now $13, GPRLF at $1 – now $2.25, SLW at $6 – now $32, to name a few). AG is my favorite now. EXK would be number 2. I’m also big in uranium, but that’s another story.

    Hope the info on AG helps everyone on this site to do well for themselves (though go to AG’s website and do your own dd to develop your own conviction). Turd, you’ve built a great site and a great community on here! Keep it up!

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  16. Right,

    I bought GGCRF at .55 (went to $1 in a couple months), now down in the .85 range I believe. I like it, but don't love it because of the share structure and management. In juniors the share structure is one of the most important factors you can look at as it tells you a ton about management and their ability to deliver. The management here has dilluted like crazy and that gives me pause. 300,000,000 shares outstanding with over 60,000,000 options and warrants between .46-.64 cents. That's a lot to fight through. They do have good property and experienced management with the merger and the Hecla crew running things, but Hecla doesn't miss them. IMO they're not great management, just experienced. I have a small position and I believe it will go up...maybe a lot, but there are much better, safer plays with stronger management such as AG. GGCRF has a $250 million market cap with nothing to show for it. They might produce a little in 2011, but AG is four times bigger and has 350 million oz. ag proven up and produced 7 million ag. eq./oz this past year and will up that to 9 million next year. That's a ton of value in real silver at a time when we all believe silver will fly. At that time I want producers, not promisers!

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  17. Love seeing where the comments thread is going tonight. Everyone, please list your best picks in silver and gold. I like SLW, AGQ and SIVR (allocated physical silver closed end ETF, which tracks better than SLV and has allocated silver bullion).

    I don't know much about junior and silver miners, but would love to get a list of tickers to research from others. Please share your best picks!

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  18. For investing I like the USAA precious metals mutual fund (USAGX), it has EGO, SLW, GOLD, NEM, and a batch of other miners. I believe you have to be a member of USAA (military or ex-miltary or a dependent) to purchase it, but I made a fair chunk of money with it on the runup from August to December (should have gotten out Dec 31st, but that's another story.... ;-)

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  19. I'm in GPRLF, HL, SLW, SVM and TMBXF.

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  20. For those interested in indexes:

    GDX = Senior Miners
    GDXJ = Junior/Intermediate Miners
    GLDX = Explorers/Junior Miners

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  21. Another interesting piece on Turk's site:

    According to Rakhimov, governments around the world will become dominant purchasers at the silver market soon. This development could be compared to the gold market where the international central banks have become net buyers.

    http://goldmoney.com/gold-research/sean-rakhimov-prefers-silver-over-gold.html

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  22. Besides GDXJ, SLW, and a few others, I like the three silver graces: AG, AUMN, and AXU

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  23. Following Ranked from BIGGEST Growth Potential to the BIG Growth potential:

    NWIFF.PK/NWI.TO (Nuinsco Resources)
    RPMGF/RPM.V (Rye Patch Minerals)
    AXMIF (Axmin Inc.)
    ASLRF/AQC.V (Arian Silver)
    GGCRF (Silvermex/Genco)
    RVMID/RPM.V (Revett Minerals)
    GPRLF/GPR.TO? (Grant Panther

    The Top 5 I am highly bullish on.
    Current top market valuations in portfolio:
    NWIFF
    ASLRF
    GGCRF
    RVMID
    RPMGF
    --
    I like the silver play early in this bull...
    I actually blog about these and in the near future will be logging daily thoughts on the movements of the mining sector.

    http://thehardrightedge.com/2011/01/12/my-investment-journal/

    Also be sure to read about the Federal Reserve and how it runs our system and what we can do about it! We need solutions to our problems! After all, this manipulation is preventing a collapse of our currency temporarily... why do you think "someone" is trying to keep it low?
    -
    Scott J

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  24. AG @12.68 has developed into one of the strongest mid tier producers in the sector. Not to mention that AG has successfully overcome a slew of obstacles that would have probably sunk a weaker management team, but long-term shareholders (me 06) remember suffering through multiple dilutions throughout the development phases...in fact as recently as March & August 09.

    GGCRF @.84 is a development stage explorer/emerging producer with requisite working capital requirements, and may never operate on par with AG. From an investment perspective, I see these companies as apples & oranges.

    It's not my intention to pump this stock (always conduct your own DD), but given the production assets acquired in the Genco merger, and the HL/SSRI management contingent, I remain near-term bullish this company with a rising POS, in spite of the current share structure.

    On another note, Global Resource Investments offers a series of free online educational videos for those seeking some nutz & boltz information short of going back to school as a geology major.

    http://www.gril.net/education

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  25. looks like we will dip to 135x today :(

    copper and oil didnt recover..

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  26. http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=118854&sn=Detail&pid=504

    "...For a number of years now, China has been developing its gold market. Huge precious metals warehouses are now situated in Hong Kong next to its very efficient Airport there. Recently China expanded the number of gold importers permitted to import gold to China. China's banks have developed gold distribution centers throughout the major cities of China. The Chinese public can see the benefits of owning gold by the price rises it has seen in the gold price over those years. The government itself is accumulating its own local gold production as well as encouraging its citizens to buy gold. If there was any intention of re-valuing the yuan, then the Chinese public could well see this as a betrayal of investors by the government.

    No, we have no doubt that we will not see a rising yuan. We have stood by this forecast for the last two years, in the face of foreign pressure on the yuan to rise. Instead, we continue to expect the gold price to perform, in the yuan, much as it does in the U.S. dollar now. For that reason and because of the ongoing development of China and the growth of a huge middle class in China, for the foreseeable future, we see a steady growth in the rise of gold investments in China..."

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  27. My personal favorite mining company is Impact Silver. In the bad years of 2007 and 2008 they managed to make a profit, something which apparently extremely difficult in the junior silvermining sector. They have a very conservative management which has used the last few years buying up highly prospective lands, which they have not yet drilled.

    The reason why I'm certain they have untold riches is because:

    A. Past production by the conquistadores has been extremely high, but these Spaniards were unable to extract the deeper ores.

    B. These lands lie next to their already producing mines, which have grades of around 300g/t.

    The CEO is also the CEO of Energold Drilling, which is a drilling company with a 22% interest in Impact Silver. This way Impact will always be able to drill whenever they want to, for a lower price than usual.

    The best part about this stock is that, because they don't spend a lot of money on marketing and haven't been drilling a lot in the past, their market value is a lot lower than it ought to be. Management is now busy drilling holes as fast as they can to increase their measured resources.

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  28. Attack under way. Hold on tight. I keep watching 1360 and 28.

    Eric

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  29. Tipping point approaching quickly and you can sense it with the violent attacks on PMs. There will be no retreat. Only one way, forward.

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  30. Home Sales in 26 min...

    Maybe thats why they put pressure on Silver

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  31. OK, I'll admit to being new to mining and silver- long since 24. Got greedy and levered into the recent massive volatility, range we've entered into between 28-30. BTFD, etc. Fundamentals tell me the silver story is THE story. Looking at the HUI I see buying gold stocks near resistance is a great low-risk, high-reward play. But silver stocks? I don't know. AG was 4 in August and hit 16 last month. 400%?? Isn't that a little much to be buying in at 12? Just a comment from a newbie who wants to become a pro without losing all his money. (Yes I know step one is to stop the leverage, step 2 is to buy bullion and hold, etc.) GLTA

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  32. Stream of data coming out this morning:

    Jobless Claims
    8:30 AM ET

    Existing Home Sales
    10:00 AM ET

    Leading Indicators
    10:00 AM ET

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  33. Reminder...

    Alf Fields

    "Yesterday the PM fix was $1360.50 and the morning fix $1357.50.

    Conclusion: gold has either already finished the correction or requires one minor drop below yesterday’s fixings to finish it."

    http://jsmineset.com/2011/01/18/a-note-from-alf-fields/

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  34. Fits the pattern of the last couple of weeks, whack the PMs before the news hits.

    Wonder how ugly the jobs number will be.

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  35. Make sure to tune into CNBC for your morning fix of humour/infotainment.

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  36. Thursday is the day and I just forgot to sell at 8.25. Hate it!!!!

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  37. Damn, metals are getting crushed.

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  38. Gold @ 1347.30 as I write
    Below $1300 and I get scared.

    -DoubleDip

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  39. PMs attacked with extreme prejudice. The response to this attack will be the tell.

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  40. Another coward attack this morning.

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  41. hey guys, silvers on sale, time to back up the truck!

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  42. All gold and silver coins on sale at a coin shop near you!

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  43. 9:02 and the Witch is on the Stick! Actually it looks brutal across the board, but silver is 27.80, gold 1348.20.

    Folks, just go do other stuff today. Keep your powder dry, it seems to me like there's more to this. It's too prolonged, too blatant. In the face of a week-long USDX swan dive.

    They've done this in the past to take PM down in advance of really really bad economic news or developments. This way, when the news hits, the momentum takes PM back to where it was, or marginally higher, instead of into the stratosphere.

    Last summer was a long, tough slog for PM. The sustained bear raid was frustrating to live through. They were softening up sentiment in advance of a lot of bad fiat paper news. Bad news was building, and now has been temporarily stemmed by another shot of QE re-animator juice for their walking dead guy.

    But gold went to 1430 and silver to 31 anyway. The point is, imagine where they should have gone had they not been knocked down first.

    This is just more of the same. Silver and gold shrugged off the Lilliputians last time, and they'll do so again in '11. But as I suggested yesterday, I can easily see this raid continuing through Options Expiry next Weds.

    I'll likely wait until next week to buy so I get more metal for my silly FRNs. But c'mon, we're ALREADY in Back Up the PM Truck territory.

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  44. Good morning.
    Today's action should NOT come as a surprise to anyone.

    1) I bought a few calls yesterday
    2) The dollar dipped yesterday to within 3 basis points of the low on 11/21. From which, manufactured EU "news" caused a sharp rally. Same script is being played out here.

    1345 is the next support in gold. Lets see if we can crawl back above 28 before the close.

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  45. Seems the conversation has now moved on (PMs getting clobbered this a.m.) ..but I just got back on here since my post of last evening and I wanted to thank you all for responding and giving your advice on the miners. I don't have huge positions in any of them but a fiat $ is a fiat $ and I want mine to buy into as much silver as possible ..so thank you again.

    I am long GGCRF, CZICF, PCGLF, RVMID, ISVLF, SLW (very small position), BULM, EGI, ERRCF (there's a risk for ya), SHSH (there's an even bigger risk for ya), GPRLF, & USSIF ..and a few others with positions to small to mention. I do like the advice about holding a certain percentage of your shares as core and trading a lesser remaining amount of shares on volatility.

    FABULOUS discussion & site!

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  46. I'll type a longer, new post on this theme in a while but, like Alf, I think this is the end of the "correction".
    I'm buying some miners at HUI 510 this morning.

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  47. Luckily, I think the stupid money (i.e. hedge Fonds) is already out of the game and the smart money (=we, BoS) don't stop out silver anymore which means that price won't drop too much.

    In fact, the silver drop is next to insignificant when compared to gold. Maybe it's just a small visit to the sub 28 territory to smell one last time the air of yore ;)

    BTFD! :)

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  48. I'm going to be bearish at this point, and pull my money out of the market, park it somewhere safe and just wait and watch....I'm an investor rather than a trader, so I'm not worried about catching the bottom, I'd rather get back in when there's a definite upward trend in the PMs and the market at the same time. But I might buy a little physical here and there, after all, there's a blue light special going on... ;-)

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  49. I'm also prepping for my first buy (after 10 years) of 1000 oz slv maples. This seems like a nice moment indeed.

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  50. A not too crappy jobs report today has pushed the USDX higher


    EUR/USD holding firm as of now. If that starts to sink, the USDX will go nuts

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  51. My opinion is this could be part of a more substantial pullback in PMs as the government gives off the appearance of getting its act together i.e. by not bailing out local/state governments. Of course, the problems will only get worse, and when the Fed caves and starts buying muni-bonds, it's PMs 2 da moon!

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  52. @Daniel

    No offense intended but at no point should we consider nimble, well capitalized players like hedgies as dumb money.

    At least in the paper game.

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  53. We need our "buyers" to step in now as it is evident that the EE is out to hammer into our heads that "resistance is futile".

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  54. It's not a 'pull-back', it's a 'smash-down' in the face of overwhelmingly positive fundamentals, especially with respect to silver. The question is when will the hammer be shelved? There will be quite a rally after that.

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  55. 27,75 and 1345 is support,being tested right now.

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  56. Qussl3, I get your point and I am sure, not all of these are stupid.

    But I just don't think the hedgies are interested in fundamentals. ZH and the like consider them algo-driven momentum chasers, and I sort of agree.

    Besides, I think it cost the EE a lot to breach 28 and their success is far from convincing, since (at least up to now) silver didn't start on a stop-loss driven dive, but just lost some petty 20ct from there :)

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  57. Ah and it's not yet time and clearly, I have no clue, but I have some feeling that this is going to be a booomerang.

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  58. Wonder if we will start to see a separation of paper and physical. When will entities refuse to part with silver at crimex spot and instead set a different price.

    I am sure JPM wont be able to deliver any physical at this price and would push the market up 30% looking for it (if that is the premium they have been paying to make people not take delivery).

    Ironically for me in AUD gold and silver have taken only a small hit.

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  59. Mama said there'd be days like this.

    I'm rolling up a bunch of loose silver half dollars that I have, just to make me feel better.

    Eric

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  60. Holy @#FS!#@#@!! Days like this test one's true commitment to BTFD.

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  61. So... dollar goes up, silver goes down...

    dollar goes back down, silver keeps on going down.

    anyone who cannot see that this is manipulated has to be blind - or retarded

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  62. WTF! Did the BoS take a field trip or what.

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  63. Stocks down, crude down, PM's down, copper down and the USDX rising but still below 79. This looks more like a deflationary contraction to me -- like QE-2 is running out of steam.

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  64. Is it too early for little whisky on the rocks? Please advise.

    Eric

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  65. Coper close to critical suport,crude close too,hui touched trendline,London fix over,Silver at support,should bounce from here.

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  66. @wingman, wingman, Lemand et al on miners,
    Your posting on miners are one of the best read for me during the last six months.
    I have a quant back ground and has started trading PM stocks actively with good trading tools like Bloomberg terminal since last fall. I closed few hundred round trip trades so far and worked hard to develop good trading strategy. After reading your postings, I realized that my effort can’t beat your strategy: understand fundamentals, pick best miners, and buy and hold long. Like you guys, my favorite miners are AG/GPR /AGQ and of course PSLV. Admittedly, I didn't pay much attention to the fundamentals of the miners, so I was basically gambling. Shame on me! It reminds me the wisdom of Bruce Kovner at Market wizard that best strategy is perhaps the combining fundamentals and following trends. Thank you for enlightening me again. And of course, cheers to Turd to make this best blog on PM.

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  67. Tyler-style algo-speak would be like:
    Stocks. Cannot. Finish. Down.
    Wait for the Bernank and his PPT to step in and save the day.

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  68. Sweet Jesus on PMs! Just looked at them for the first time today. o_O

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  69. This must be the reason for the drop:

    http://www.zerohedge.com/article/philly-fed-misses-expectations-comes-193-admits-broad-price-increases

    Because everybody knows that price inflation is horrible for tangible assets like gold and silver.

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  70. $1600 by Memorial Day.
    Please see new post.

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