Feeling in a slightly humorous mood, this light hearted post will offer a glimpse at the irrational and ridiculous current market pricing of mining stocks in general, and Hecla Mining Co (HL) in particular.
Yes, I own Hecla Mining stock as you may recall. But I am not selling it - no matter how crazy it gets during the rest of this week. And I'll show you why with a weekly chart in a moment, but first let's look at the HL daily chart.
*
Today Hecla reached $8.17. Hecla has bottomed around $8 a few times in the last 6 months. And it has reached $11 a couple times, too.
*
But somehow it just seems irrational that silver and gold have risen so much in the past 6 months, the stock market has risen a lot too, and what the heck is wrong with poor Hecla?
OK - let's have a look at the weekly chart.
*
Humm..... kinda looks like a cup with handle pattern. Well, that makes me feel better I guess.
*
Earnings: Profitable last year. Projected 50% gain in net earnings per share for 2011. That's not too shabby.
*
But look at that price action in relation to the price of gold. The stock's price now is lower than in 2004 when gold was just $430 an ounce.
*
And for that matter, silver reached a high of $8 in 2004. Today it was $42.
*
YOU HAVE GOT TO BE KIDDING ME!
*
This stock, and the miners in general, are so mispriced it is irrational and unbelievable. But that will change and real soon. Not in the next day or two, but soon thereafter. In a couple short weeks $8.42 for Hecla Mining is going to seem like a fairy tale.
*
Money always finds its way to the most undervalued assets. In today's market, that is the precious metal miners.
*
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/quotes_special.gif)
Agree that the miners are extremely undervalued now. I own HL too. One thing holding them back is a concern over environmental liabilities at I believe a mine in couer d'alene. Hopefully this liability is minimal and the stock tracks the PM's rise more closely
ReplyDeleteHow do the shares outstanding today compare to 2004?
ReplyDeleteAnon - I wondered the same thing but did not find it easy to get the answer. Please, if you find out, I would love to know that answer. Thanks.
ReplyDeleteJohn -
ReplyDeleteI know all the miners are down with the metal's prices, but I've been wondering if the recent mine accident at Hecla is possibly affecting its price more than others. It seems to be pretty well publicized.
Shares outstanding in Hecla are roughly 2.25X those outstanding during 2004 (w/ out doing the precise research... I've just held the stock on and off over the last several years). That said, the stock is still DRAMATICALLY undervalued relative to the metals. The EPA fine reserve during Q4 2010 blowtorched the stock from a technical perspective, which is why it's down on the year. I'd expect a rebound at some point, but I don't see anything profound happening in this relative to the potential performance from AG, EXK, or SLW.
ReplyDeleteJohn,
ReplyDeletedo you still think that gold will have its final parabolic blow off or have we already seen the high... also, you wrote a blog on miners making a rally during the last month of the gold move, do you still see that in cards??
Thanks
traderRob - thanks for the excellent information and data!
ReplyDeleteILUVPMS - no, the highs have not been seen yet, and yes, the miners will rally during the last month of the gold move. By next week it will be a whole new ball game.
John,
ReplyDeleteThanks for the post greatly appreciated. Its been quite the expected bloodbath in silver! Your parabolic analysis has been spot on and your articles are easy to read and full of indepth empirical analysis.
Cheers and happy trading.
For the record, I have made enormous sums trading HL, and it absolutely wiped out every dollar I've ever made trading the thing during Silver's current run. I lost a mint on its options and will likely never play them again. The EPA settlement reserve did enormous damage to the chart, and management has shown no reservation with respect to diluting existing shareholders over the years. Those are the company-specific caveats, and I would heed them whenever I touch the issue. That said, the stock never stays below the 200 dma for too long. I'd expect it to run along with all the other SIL components for the next month, but it will likely languish during the summer months.
ReplyDeleteIf I can find a low risk entry point around the end of summer below the 200 dma, I'll do what I've done for the last few years and go long in size into the late Fall run-up. This stock's not for the faint of heart and should only be purchased in extremely low-risk setups. SLW's more of the trend follower, and you seem to have a great handle on some of the finer individual issues, John. I'm digging the TSI work and am a subscriber of "Toby Connor's"; you guys do some awesome work.
Thank you traderRob for your comments. If you will write me your email address I would like to make a chart of HL and send to you. tsiTrader@gmail.com
ReplyDeleteHL traded below its 200 dma today and I was thinking just what you wrote above - it does not seem to stay there long. So when price was about $8.15 or so I bought a fist full of call options and said a prayer. A couple hours later I sold the lot for a 35% gain. Incredible volatility lately - wish I did not have to teach 6 classes a day. Then I would really have fun! 5 more weeks.......
ILVPMS - thank you. Compliments and encouragement are always appreciated.
ReplyDeleteHi John,
ReplyDeleteBig fan of your work :)
has the USD bottomed? Lot of volume over the last few days...this is looking like a BIG BOTTOM
silver getting beaten when it's down...i am losing hope
any updates?
Anon - thanks for being a reader/fan! The USD has not bottomed, and I do not believe it will bottom until it takes out the 2008 low of 70.70
ReplyDeleteLosing hope? That is what you are supposed to do. That is what these corrections are for. They reset sentiment so that those who were bullish on precious metals are scared and sell way too early - then chase price all the way up the parabolic.
Please, don't do what you are supposed to do. Let someone else do that. Separate emotion from reality. Gold topped after going up nearly 13 days in a row. Today was Day 15 of the daily cycle and when the low is put in - I presume within the next week - the final daily cycle will begin and things will get real fun again.
Patience.
Hi John,
ReplyDeleteDO you think you can provide us readers a blog updating the daily cycles for gold and silver, where we are, and where you expect us to be within the next month and a bit? If so, that would be greatly appreciated!
Cheers,
john what do you think of axu?
ReplyDeleteHi Phoenix -- thanks for writing. You have a very interesting and impressive website, btw.
ReplyDeleteAXU has just fallen below its 50 dma and tried yesterday to get back above it. It is at the lower Bollinger Band and is thoroughly oversold like all other silver miners, for the most part. However, this stock closed strongly positive yesterday and has been a true leader since late January. The TSI is getting real close to a trend line break BUY signal, but not there yet. It may trade sideways today and start to really move on Friday if the Dollar resumes its waterfall decline. I like AXU.
ILUVPMS - there is a similar question in the "Spending 75 Minutes with the US Dollar" comments and I will write my thoughts there.
ReplyDelete