Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Gold Stocks: History Argues for More Upside

By

Judging from history, one should not be alarmed about the recent gains because these rebounds tend to run much longer and higher.

PrintPRINT
Gold and silver stocks are not only the most volatile sector but the highest beta sector. Therefore the percentage moves can be quite exaggerated relative to the market. Currently, the shares have emerged from a W bottoming pattern. They have gained substantially (in percentage terms) in just the past month. I wanted to consult history and in particular the rebounds following the bottoms in 2000, 2005, and 2008 to get a sense of the reasonable upside potential over the coming months. Judging from history, one should not be alarmed about the recent gains because these rebounds tend to run much longer and higher.

Below we chart the HUI (^HUI) in weekly form dating back to 2000. We also plot the HUI's rate of change for 18 weeks and 26 weeks (equivalent to four and six months) and we note the length of time it took the HUI to break to a new high following the start of the cyclical bears. The market typically rebounds 50%-70% four months following a bottom and roughly 75% six months after a bottom.



If the HUI rebounds 50% from the May 2012 low then we are looking at a target of 558 by or in October. That target is essentially on par with the Q1 2012 high of 555. Secondly, a six month rebound of 65% would take the HUI to 615 (exactly the level of the red line) by or in December. Even if these targets are hit a month or two later, we still would experience a bullish outcome. Keep these targets in mind as we move to short-term analysis.
< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE