Zak Mir – Gold stocks update and getting it right!

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3 mins. to read

Although it feels like it was weeks ago since I wrote up SolGold (SOLG) for our new Research Bites, it has in fact only been a few days. Indeed, this situation is outstanding in that the  share price has already doubled in a week, and so is worthy of an update. To me, we are in fact looking at one of the better charting examples of the year, apart possibly from the recovery of Facebook (FB) and again which I flagged in Lessons From The Financial Markets For 2013 in December.

Unlike calling the social media giant higher from the upper $20s however where it was a rocky ride both technically and fundamentally, SolGold, in contrast, has offered little deviation from the bull scenario since the Spring.  In May, backed by bullish divergence in the RSI window and an initial break of the 200 day moving average (then at 3.25p), it was not a hard call to anticipate that the shares would potentially double. After only a slight wobble they did indeed do so by mid August, breaking out of a bull flag between 7p – 8p, which in the latest Research Bites targeted 12p. In fact, this particular example is not so much a celebration of a correct call, but more one of how getting on the right side of a big winner is not always the mission impossible we might imagine it to be. The situation now is that while the zone of the initial 2012 resistance at 13.5p is held – there has already been a test this morning – we could be correct in pencilling in an end of 2013 target of 24p to retest former 2011 resistance via the U shaped reversal chart formation.

SolGold may have been relatively easy to get a handle on but the same certainly cannot be said of Petropavlovsk (POG) shares where I would maintain that even after the recent July / August doubling of the Gold miner’s shares from trough to peak, the search for big gains might have meant that the latest decline from 134p to 93p has shaken out any recent bulls. Perfect environment for a renewed ascent or new downtrend you ask?

Indeed, even if you took your profits and headed for Monaco, I would still venture to suggest that trading in a stock which seems to have such sadistic pleasure in depriving short term traders of their cash is an exercise which should be reserved only for the professionals / masochists (or our former editor Richard Jennings where we understand he has been having fun with this at Titan!). This point is underlined by the way that the sell offs from both the June and August peaks for Petropavlovsk were via unfilled gaps to the downside – the type of charting turnarounds only seen in the most powerful of bear markets.

Even worse, the August failure was a failed attempt in itself to fill the top of the June gap at 140p. This puts us on guard as far as regarding the latest rebound attempt by Petropavlovsk which could be yet another false dawn recovery. The only aspect which seems positive after the pullback late last months is Tuesday’s intraday rebound from just below the falling 50 day moving average at 95p. At least while there is no end of day close back below the 50 day line we have a theoretical dip buying opportunity which could help this stock head back to the top of last month’s gap at 124p – backed by a RSI uptrend line from July running through 45. The timeframe on such a move would be the next 2-4 weeks.

While I might have shied away from Petropavlovsk in the recent past, as far as Fresnillo (FRES), the Mexico focused Silver miner is concerned, it has been easier to take a more brave stance given the way that last month the stock served up a filled gap down reversal followed by a bull flag break (between 1,100p – 1,200p). The implication being that while above 1,100p, we could be looking at a potential jump towards the 200 day moving average now at 1,381p. So far we have just missed out, but it is still the case that while there is no end of day close back below the 10 day moving average now at 1,256p, the 200 day line is the 2-4 week target.

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