Monday, July 1, 2013

Precious metals rebound opportunities

Any group of stocks that have been out of favour for several months will as a group, eventually serve up a recovery opportunity. One example would be tax loss selling in December last year and the subsequent January recovery opportunities as set out in a Getting Technical Interim Update #GT1389 dated December 14, 2012. The 55 stocks selected as a group returned over 15% by mid January 2013.

The recent bearish stampede out of the precious metal miners has driven the prices of many miners down to levels that may be extreme as measured by per cent deviation from the mean – in this case a simple 30-week moving average. The last group of stocks that were driven to historical negative per cent deviation levels were the Canadian bank stocks at the peak of the global financial crisis. In the example of Bank of Nova Scotia (BNS - $56.22) on February 20, 2009 the stock hit a low of $24.45 and printed negative per cent deviation # of -35 %,.( a modern record).

The table displayed here is the output for a filter run at June month end that screened a basket of precious metals producers as to their current per cent negative distance from their respective 30-week simple moving averages. The selected basket was sorted by the % deviation number and then divided into four probable outcomes.

Low Risk Recovery Selections: Lowest risk with moderate short term positive returns

Medium Risk Recovery Selections: Low risk with fair short term positive returns.

High Risk Recovery Selections: High risk with above market positive returns

Question of Survival Recovery Selections: Very high risk with volatile returns.

1 comment:

Shawn Severin said...

This is a great list.