T. Ferguson: Is it Time to Buy the Miners?

mali goldIt appears that we may have finally found The Bottom in this drawn out and painful decline.
Of the more encouraging signs since the first of the year has been the UP tick in the HUI and most of the mining stocks.
Is this just a blip or are we in the early stages of a reversal and rally?

And if we have found The Bottom in the shares, which ones should we consider possessing as the rally continues? C’mon in. Let’s take a look.


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By T. Ferguson, TFMetals Report:

First, some history and a reminder. Through all of 2013, I was NOT a fan of the mining stocks. I wrote this post in early January of last year:

http://www.tfmetalsreport.com/blog/4424/miner-case-depression

That column concluded with this “warning”:

“So, what’s the point of all this? Why even jack around with these damn things? Just buy physical metal, take delivery and forget about it. And don’t tell me about your IRA. There are plenty of companies out there that can help you to buy bullion within that thing, too.

Stack, stack, stack and BTFD. Your only winning move.”

Back then, the HUI was near 450. By December, it had bottomed(?) near 190. YIKES!

But, below 200, I thought that the HUI was starting to look interesting. I posted the chart below back on December 2 and noted that the index was approaching levels last seen in 2008 and 2004!

So, with this index having fallen to its lowest level in ten years, things began to look interesting. Were we seeing a washout? Was “tax-loss selling” in December the key to the final washout? The price action in early January should tell the tale and perhaps it has. Since late December, the HUI has rallied over 10% and, on Friday, convincingly broke through and closed above its 50-day moving average. This is another bullish, short-term signal and likely sets up an extension toward the 100-day near 220 and the 200-day near 240.

A run to the 200-day would mean another 10% from here so there’s still time to make a little fiat for those willing to “jack around with these damn things”. So, below are updated charts for 13 of the miners that we have followed since this site began over three years ago.

Interestingly, six of these have rallied considerably and, in doing so, have already broken through their own, individual 200-day moving averages. This is very bullish signal for these stocks. NOT so bullish that you sell metal and buy them or plow all of your remaining fiat into them…BUT…bullish enough that, on weakness and dips, you may be able to accumulate a little at a time and, eventually, make some fiat currency which you can convert into physical metal at a later date.

Let’s break these into groups. These first three broke through their 200-days a couple of weeks ago and have continued to rally. For StevenBHorse, let’s start with SSRI. If it can break through and close above $8.40, it looks to be headed to $10 before pausing and consolidating:

Looking similar is PAAS, which looks almost certain to be headed to $14:

And then there’s NG, which looks like $3.50 BUT beware of the false breakout, like it had back in late August:

$7.77 ShippingThe next three look quite bullish, too, but they only just broke through their 200-day MAs back on Friday. This means they are subject to a pullback which could drop them back below the 200-day, at least for a short time. Watch these three closely as the may merit the best short-term opportunity should a dip develop.

Let’s start with EXK, which looks like it could easily rally another 25-35%, toward $5.25 or even $5.50:

Then there’s HL, which looks to head from $3.25 to $3.50 to $4.00:

And AEM, which looks like $32 and maybe $34:

OK. It’s halftime. For your halftime festivities, I give you SLW. Why? Well, it’s not really a miner per se. It’s really more like a proxy for the price of silver. Note that it’s share price is often very close to the cost of silver by the ounce. It got way ahead of itself back during the rally of late last summer when it reached all the way to $29. Is it getting ahead now? Maybe. Perhaps, instead, at $22+ it is signaling a further rally in silver to come. Let’s hope so.

Now back to the action with our second group of six charts. First, here’s EGO, which is about to run into some stout resistance near $7:

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Poor, old SVM…the victim of malicious hedge fund selling…is about to have some trouble near $2.90:

And AUY, which has the potential to move toward $12 but has to get through considerable resistance around $10 first:

Finally, here are the final three. All of them are still considerably below their 200-day MAs so I would avoid them for now. But keep an eye on them, though. There may still come a time for accumulation.

First, here’s GG, the only “major” that I follow. Like the other larger-cap miners, it may continue to struggle as it adds/buys other juniors and exploration companies. This dilutes the share base and tends to keep a lid on price, at least in the near-term:

GOLD has long been a nice proxy for the price of gold and you can see it in this chart. Let’s keep an eye on it, much like we do SLW:

And, finally, here’s Santa’s company, TRX. It has been savagely beaten by folks seemingly determined to disparage both him and his company. As you might imagine, this doesn’t surprise or bother me in the least and I continue to own it, if only for the quarterly reports and the annual invitation to the shareholder meeting which, one of these days, I’m going to attend:

OK, that’s it. I close with a word of caution…

All I’ve done here is give you some charts. Before buying ANY of these, you must do your own due diligence including a look at each companies cash situation, its book value, its debt level, etc. And, if you decide to buy one or two, be prepared for extreme volatility which may require you to do some dollar-cost averaging. That said, it does appear that we may have finally found The Bottom in this drawn out and painful decline. Invest accordingly.

TF

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