I have to confess I really don’t have any interest in the macro economic babble explanation as to why gold / mining stocks may be cheap or why now may be the best time to go long of them. The problem with picking the bottom of any asset class be it mining stocks, real estate or Tulips, is that by definition you will very rarely get it right. Too early, or too late is the most likely scenario. And of course, if you think about it, being late (like a good party!) is the best way to go. For instance, while London real estate has bubbled up in the past couple of years, the start of the run was arguably in the depths of the GFC in 2008 and the fall of Lehman’s. Going long, even as late as 2011 – a three year delay just to make sure, would still have meant you banked great profits, with the added bonus of not getting hit by a relapse as seen in 2010/11.
I think the same delayed approach may be correct with the likes of second line mining stocks such as Petropavlovsk (POG) where the current set up does appear very attractive indeed from the bull perspective. On a charting basis it is actually quite tempting to call the bottom of what has been a nightmare bear run given the clear and sustained recovery from the former July 61p intraday floor. This underlines the bear trap effect currently being seen, but there is more… The latest set up over recent days is a V shaped bull flag, one of the strongest charting configurations around. This should be more than enough to propel the shares back up to an implied September resistance line projection target at 95p over the next 4-6 weeks in my opinion. The suggested stop loss can be as tight as an end of day close back below the 10 day moving average at 68p or, for squeamish traders, below the flag at 67p.
Hochschild Mining (HOC) is another recovery situation and we are now looking at the former July floor for technical guidance as to the way forward here. What is encouraging to end 2013 with for holders of this stock is that the shares look to be recovering this former support, and hence delivering a significant positive charting buy signal – acceptance above a former low. While we may wish to see a weekly close back above 135p, the stage seems set for a lasting rebound. December also delivered the narrowest of bear trap rebounds – a fraction of a penny below November’s 118.72p low. Such narrow traps are often a prelude to a strong rally. Therefore if you add in the way that there has also been an RSI resistance line break at 50 from October, then we have decent positive momentum for Hochschild and an implied return to the top of a July trend channel at 165p before the end of February.
The final stock in the horror mining stock trio comes in the form of Talvivaara (TALV), arguably the most “nasty” of the lot. Here the drama was ratcheted up by the way that the stock delivered an unfilled gap to the downside through the former October 4.25p level – a very serious development, and one that at the time could have been terminal for the bulls. However, the gap down turned out to be a selling climax rather than the end of the line – for now. What we now see on the daily chart of Talvivaara is a rebound off both initial December resistance under 6p and the blue 50 day moving average at 5.64p. The 50 day line is also the zone of a rising July price channel. The suggestion is that at least while there is no end of day close back below the 50 day moving average support zone the upside for Talvivaara could be as great as the post September resistance zone at 10p plus over the next 6-8 weeks.
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