I am not a technician or a chartist and as a general rule I don’t pay much attention to that sort of thing. However I have learned to respect intraday reversals, and I have especially learned to respect them for gold stocks.
For whatever reason, I have seen more gold stock rallies fail after an intra-day reversal to the downside, and I likewise have seen more gold stock pummellings end after one to the upside.
Yesterday we had a very nice reversal in the price of many gold stocks. Morevoer, the reversal was led by the leader of the gold stocks, Newmont Mining. Newmont traded almost as low as $44 before breaking out to the upside and closing at $46.50.
Newmont was not the only gold stock to reverse. Of particular note for me was that Atna Resources had a hue reversal on the day, getting as low as $0.95 cents before closing at $1.10. Another stock that has shown the resilience of a leader, Argonaut Gold reversed from a low of $6.80 to close at $7.52.
It still remains to be seen whether this reversal holds. If it cannot hold through today and tomorrow its nothing more than a fake out. But given the level of selling that has overwhelmed the sector, it feels right to me for a change. Investors who have remained heavily into gold stocks have been absolutely pummelled, and yesterday, with the price of gold breaking down below $1600 per oz and with gold stocks opening down big in most cases, it feels a like a capitulation moment to me.
I have owned Atna Resources through the slaughter and ithas held up relatively well. I added to that position yesterday after it became clear it was reversing from its lows. I also added a position in Newmont. This could be considered to be a trade. Newmont at $44 does not seem like a terribly risky endeavour to me. Finally I added to my position in Golden Minerals and I added a position in Lydian International. Of interest, Lydian did not reverse higher as strongly as many of the other juniors. I suspect this is just a short term anomoly. At any rate I will be monitoring all of these positions closely and if the reversal fails I will likely be bailing out of Newmont, Lydian and probably Golden Minerals (though at $5.30 its hard to see this stock getting very much cheaper).