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The dollar finally bounced today, and in a big way. As mentioned in my last post, the longer term dollar trend line held at just below $77.00 on the $DX-Y Index. Gold and silver also bounced today after being somewhat bludgeoned the day prior. Certainly this drama prattles on in more curious and curiouser fashion.
Like my friends Gary and Le Monsieur, I want to believe the precious metal bull is done consolidating and is ready to take off. However, today’s considerable bounce in the dollar and certain things I’m seeing in the $HUI Goldbugs chart continue to give me pause.
Luckily, I think the question will resolve itself soon, as the $HUI is approaching serious resistance on the daily charts. This resistance, if broken, will give me all the assurance I need to jump back in the market long and strong:
Now, I’m not one for advocating dandruff-shampoo formations, but the combination of approaching resistance, and the 50-day EMA give me enough pause to wait one or two more days to see how this all shakes out. Again, if this is the C-wave finale, we’ll have plenty of room to banque large coin before it’s run its course. The good news is the 200-day remains a rock solid buy-point, as it has throughout most of this long bull run for the miners.
On a happier note, today one of loyal reader Teahouse’s favourite stocks — FRG — got swallowed up by a hungry major, again illustrating why we like to buy and hold (even in diminished capacity) the junior miners in this bull instead of the larger miners.
In an increasingly active M&A market, you want to be holding buyout upside, not acquisition upside for the simple reason that,with the days of Cisco and Fifth Third Bank’s long acquiring sprees behind us, there’s just not much upside to owning an acquiror. And in owning the juniors, you know there’s always a chance of even a crappy company waking up to a 25-50% price pop. Play the odds that lie in your favor, I say.
In honor of Teahouse’s alert (I owned FRG but had never blogged about it until Employee 8 brought it up here), I will also feature another of his favourites tonight, MVG — a nice little silver miner. He gave me some crap for selling the $12.50 February calls a couple of weeks back when I was hedging the portfolio, but that trade has worked out, and I still own all the MVG I had purchased down in the $6-$7 range as a result (I’ve since covered the calls at short pennies).
I thing MVG is not far from a bottom on this pullback, if it has not bottomed already. Moreover, it’s a relatively low risk play from this point on:
Congrats to Teahouse and all my other fellow FRG holders, and let’s get out and get the next one. They’re coming for sure.
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Indeud.
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I think, I hear my train (leaving the station)
Aw, you didn’t write about silver, with SLV closing right on the 50 day sma. I called the 89 day sma as the line in the sand and it held but I should probably take some profits (SIL, for example is approaching its 50 day sma) just in case the bounce in the dollar has more legs.
Orko (OK) is another strong candidate for acquisition. Silver company with deposit edging on Pan American.
Jake, I am admittedly wrong as much as I am right when it comes to reading technicals… Do you mind explaining what your MACD circle on the $HUI indicates? To me, MACD is giving a very bullish indicator, which is why I am curious what you think.
I went totally bullish yesterday… Putting my EMA(200) theory on hold until I see what the next resistance points look like.
Sorry for the confusion, those are old circles from a previous markup that I had just forgotten to erase on this new one.
I agree, the MACD set up is extremely bullish, but I don’t find MACD to be so indicative in the shorter term.
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I see, thanks for clearing that up.
JG, what are we looking at there? About 535 or so on the HUI? Or just a breach above 530?
I’d be happy with a settle over the 50 day EMA (about $533), but that chart above is right on the $535 mark.
If the dollar continues to strengthen, it will continue to be hard on the precious. Hopefully, we can use this respite as a buying opportunity.
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Jake, the 13 EMA on the weekly gold chart has been a fairly good indicator … with a close above $1355 we could have confirmation that the downtrend has indeud concluded (I hope not) … where’s your line in the sand when it comes to the POG if you were to ignore movement in the dollar (though I know you won’t)?
That said, the $ is still rising and gold seems to have hit resistance at that $1355 level … maybe we will get that second buying opportunity after all.
Guess I should have just asked what the mark on that HUI chart would be for the 90 day EMA …
Funny you should mention that, as I was looking at the 13 and 34 week EMA’s (note E-MA’s) on gold just last night. The 34-week EMA has been stone cold money since March of ’09, and we touched it almost exactly last week. We are still UNDER the 13-week EMA, however, which I have at 1357.
Until we are above that, I am holding fire. We could very well bounce there, just like we are doing today at the 50-day EMA on $HUI.
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Thnx
So if you are starting to nibble at silver again, did you think MAG is the place to start? I have owned SLW and EDK over the past year off and on but been out of silver since early in the year.
By the way, what did you think of RGLD’s earnings? More stock for your grandmaw?
I just love beautiful sentences like this:
Free cash flow1 for the quarter was a record $48.9 million, representing 87% of revenues, which was an increase of 71% compared to free cash flow of $28.6 million or 82% of revenues for the comparable prior year quarter.
Oh grandmaw, how I love you.
Accumulate, accumulate, accumulate.
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Think RGLD is looking to gobble up a smaller minah?
Likely not, although they may gobble up other royalty players. They finance miners, they don’t buy them.
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SNDXF?
Risque.
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Franco … what else is there?
RGLD.
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True … forgot that SLW was so much bigger (cap-wise) than RGLD …
http://www.theonion.com/articles/white-house-jester-beheaded-for-making-fun-of-soar,17495/
That’s beautiful. Looks like something Le Monsieur would write.
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That ascending wedge on the S& P is a bearish pattern. Of course this market has flown right past many bearish patterns, so it could do this again. But the PM’s do seem to trade along with the S&P a lot, like an inflation trade.
Care to speculate on the Fly’s reasons for purchasing New Gold?
Does he think it’s a buyout target a la Fronteer, and do you agree?
Definitely in people’s sites. He likes their seasonality right now as well.
If you were a PPT subscriber, you’d know all this already! 😉
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My bad. I was under the impression that the PPT was a Chinese Burrito-specific momo algorithm, and therefore irrelevant to my area of focus.
Fly plays up that aspect of the PPT, since it’s “his brain,” but another real strength of the PPT is its very tight trading community. You can ask a question and get an answer on almost everything.
And all of our trades are usually announced there first.
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Jake,
What do you make of this? Silver in backwardation.
https://marketforceanalysis.com/article/latest_article_02511.html
I am only surprised it’s taken this long. There have been anecdotal stories and rumors of hard silver shortages for at least two years now.
Hope you have some fizzical.
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1. 13 contracts traded on FEB and the open interest is 86 contracts. FEB is irrelevant on silver futures.
2. The price he quotes for feb is the ‘SETTLE’ price, which is not last price but the price at 2:30 EST when the pit closes. The LAST price for feb silver was 29.090 which is not backwardation.
http://www.cmegroup.com/trading/metals/precious/silver_quotes_settlements_futures.html
This error is done on Oil, NG, Gold etc etc etc over and over and over.
HUI denied that 535 mark yet again…tomorrow is a new day.
Gettting kind of frustrating… either break through or down, damnit!
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