Precious Metals Mining Stocks: Long- and Short-Term Outlook

By: Przemyslaw Radomski | Fri, Jun 29, 2012
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Based on the June 29th, 2012 Premium Update. Visit our archives for more gold & silver analysis.


 

Today's market session is very volatile, not only in case of euro, dollar and stock indices, but also in case of precious metals. The rally in the mining stocks is much less significant than one might expect based on gold's and stocks' rally. Should this be of concern to precious metals investors?

In today's essay, we will provide you with two mining-stock-related charts: one focusing on the long term and one that provides a short-term signal.

Let's begin with the former (chart courtesy by http://stockcharts.com.)

$CDNX (S&P/TSX Venture (CDNX) Composite Index) TSXV

In the Toronto Stock Exchange Venture Index (which is a proxy for the junior miners as so many of them are included in it), we have a significant bearish signal. Prices have moved below the neck level of the bearish head-and-shoulders pattern. The pattern is: huge, clear, and completed and the implications are very bearish for those holding juniors and for other precious metals investors as well.

We created a downside target level based on the size of the head in this formation and it is close to the 2008 low. It's also much lower (40% or so) than current price levels. There is clearly much room for further declines.

However, not everything is bearish about the mining stock sector. For instance, we have just seen a bullish signal from one of our in-house developed indicators that.

SP Gold Stock Extreme Indicator

The indicator moved above the upper dashed line and this signal has bullish implications. Please note that in April it marked the beginning of a consolidation and in other cases (and in previous cases since the 2008 bottom) it signaled local bottoms.

Consequently, based on the above chart, a rally seems likely. Then again, metals and mining stocks have already moved higher today based on euro's rally. Consequently, the rally - or at least most of it - that the indicator suggested may already be behind us. Another small move up will not surprise us either.

Summing up, the outlook for miners remains bearish for the medium term (bullish for the long term) but, a temporary move up is quite likely. At this time, however, this move up, is not something that is signaling a change in the trend - based i.a. on the negative situation in the TSX Venture index, it's rather a pullback within the decline.

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Thank you for reading. Have a great and profitable week!

 


 

Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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