7 charts today, ladies and gentlemen. First, let's begin with some interesting sentiment data, then look at 6 stocks that have 'coast to coast' True Strength Index (TSI) indicator breakouts.
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Well, I do not know how to say this other than this first chart shows we still have some real fools trying poorly to play in the gold market. Actually, a whole lot of fools.
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The put/call ratio is at one year highs and there are 12 on the bear side for every 10 on the bull side. Folks, let me remind you that this is THE perfect setup for a whole lot of traders to get destroyed, and it will not be the bulls. I have circled the peak and trough data from this past February - coincidentally the previous weekly cycle low in gold. You see what happened, right?
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Click on the charts to ENLARGE
In ticker symbol alphabetical order I will briefly present 6 mining stocks. Each of these 6 stocks have this in common: they have 'coast to coast' TSI breakouts. These breakouts are not a matter of hours, days or weeks. No, these breakouts are a matter of several months.
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I have not taken the time to statistically prove this, but my observation has been that the longer the time that a stock takes to finally break out, the more reliable and profitable the trade once it does break out. My thinking is along the same lines as the concept that the longer the consolidation period, the more powerful the trending move that follows.
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This first stock is Yamana Gold Inc. (AUY).
The second stock is Minefinders Corp (MFN).
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For those of you who are new to reading this site, welcome!
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Also, there are a number of ways that the True Strength Index (TSI) indicator, available freely for use via www.FreeStockCharts .com, render Buy/Sell signals. Two of those techniques are demonstrated in these charts and are: the trend line break of the TSI indicator itself (as opposed to a trend line break of the stock price itself) and the ZERO line crossover.
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If a person were to buy a little of each of these 6 stocks and hold them until mid October, it would not surprise me to learn that that person would have outperformed 95% of the people on Wall Street.
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I would do it myself, but I cannot sit still that long. Call it a character flaw, if you wish.
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But if a reader does buy these and hold to mid October, please write me then and let's see how well you did. I'm sure I will feel envious.
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I thought high put/call ratios meant bearishness as there were too many extreme longs?
ReplyDeleteJust the opposite.
ReplyDeleteLet's say there are 10 bears (puts) and 10 bulls (calls). The ratio of puts divided by calls (10/10) is 1.0.
If there are 12 bears and 10 bulls, the math is (12/10) = 1.2
And that is precisely what we have as of last Friday.
Thanks for the comment/question!
Where did you get the Volume Put/Call Ratio chart for GLD from?
ReplyDeleteThanks for your superb work. It is much appreciated.
ReplyDeleteThe link is:
ReplyDeletehttp://www.schaeffersresearch.com/streetools/indicators/equity_volpcratio.aspx
Also, thank you for the recognition. That was both kind and thoughtful of you.
You can test your buy and hold hypothesis with Google Spreadsheets. Here is a slick example.
ReplyDeletehttp://spreadsheets.google.com/pub?key=t4zKldW9slS9x_czK_uT6Bw&single=true&gid=0&output=html
Are you worried about an economic slowdown and the much anticipated fall market crash affecting gold mining stocks?
P.S. I don't have anything to do with Horowitz & Company. I just like their google stock spreadsheet with live prices.
I guess I have not given much thought to 'the much anticipated' fall market crash.
ReplyDeleteBut I have given a little thought to these ideas:
1. the great Bear Market of 2001-2003 cut the SP-500 in half, a 50% haircut. Yet the miners ($HUI) rose during this same time frame by 500%.
2. the miners ($HUI) have now been consolidating below 500 and attempted to break that level 4 times. It is a consolidation that dates back to March '08. Not only that, but the $HUI was terribly stretched above the 200 dma back in March of '08. At this time they have reverted to the mean and are ready for a serious explosion. The coming rally should take the miners from 500 to about 850 by next spring.
3. Miners generally move more in line with secular bull gold than with their secular bear friend, the stock market. I will watch gold to see what miners will do, not the stock market.