Saturday , 23 September 2017


Get Positioned Now – Gold Stocks Are About to Bottom

Forecasts are only a guide or a potential road-map as no one can predict the future but we can assess risk, reward and probabilities. [Given that,] we think that the current probabilities favor a secondary bottom in gold stocks and that, very soon, the risk/reward dynamic will be heavily in favor of longs. [I explain and illustrate my conclusions below.] Words: 484; Charts: 2; Tables: 1

So says Jordan Roy-Byrne, CMT (www.thedailygold.com) in edited excerpts from his original article* entitled Secondary Bottom Coming in Gold Stocks.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), may have further edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Roy-Byrne goes on to say, in part:

Gold Stock Sentiment

Below is a sector sentiment indicator from sentimentrader.com (a combination of short interest and put-call ratios) showing that it can not get much worse for gold stocks (well, perhaps a bit).

 

 

Gold Stock Breadth

Breadth is a measurement of participation and the GDM chart below shows the number of stocks trading above their 200-day moving average at major bottoms and at secondary bottoms.

 

The chart above compares the current breadth to the breadth seen at the secondary bottoms in 2005 and 2009. Note that:

  • at the major lows, breadth is usually at or near zero,
  • at the secondary low in 2005, breadth was 41%. The market was in a stronger technical position then as the cyclical bear market was tame,
  • at the secondary low in 2009, the breadth was 20%
  • in 2002-2003 there was a triple bottom but, unlike the present, there was no major technical damage. At the third and final bottom breadth was 10%.
  • at present, breadth is at 38%. It can fall to 20% and that would be in line with the most recent secondary bottom (following a major bottom).

The conclusion is that following a major bottom long-term breadth should remain healthy. It still is.

Course of Action

Below is a chart of GDX showing how this secondary bottom could play out. Currently, $43 is both lateral and trendline support.

 

 

Less than three weeks ago we wrote:

If we are indeed correct that the metals and shares will remain range bound then your task is simple. Prepare yourself for further consolidation by having your buy list ready and then be ready to act when the time comes. A wise friend once told me that in a bull market the goal is to accumulate positions at the lowest prices possible.

Conclusion

Rick Rule says that when investing in the resource sector you are either a contrarian or a victim. Consider the present sentiment and technical construct and it is difficult to ignore this emerging contrarian opportunity….The Fed is meeting next week and with gold stocks tanking into the meeting, it provides the setup for a bottom and rebound into January. Now is the time to be vigilant as the time to be a contrarian could be only days away.

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* http://thedailygold.com/secondary-bottom-coming-in-gold-stocks/ (If you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then go here to learn more about our service.)

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