What do you think of FCX? I'm interested, but I either need to get a healthy pullback or start selling ITM puts.

I'm also looking at some smaller tier metals companies like ZINC and TC.

With all that is going on in the precious metal market, I think it is time for a status update. I went through some old posts and came up with a list of gold, silver, and commodity stocks.

ILVCA, CMIN, MNEAF, NAK, OSK.TO, ZINC, TC, EGI, GBG, FCX, IVN, GG, ABX, KGC, GRS, TGLDX, UNWPX, and USERX.

I suggest we split this list up and take a few for further research and update each other on this forum. I will take GG, ABX, KGC, and GRS.

Hope we can get something going and be ready for Monday's opening. Happy researching.

Post edited 11:09 pm – October 10, 2009 by spreadtrader

I'll do ABX right here. This is a fun trade for any gold bug, but you have to be able to read a chart to follow along; and I wouldn't characterize it as a trade for option novices. Still, it's not really complicated either.

ABX is the world's largest gold producer, eh? As gold goes, so goes ABX. If you look at the daily candle chart you'll see it has touched up against the 39.00 – 39.50 marker five times in the last year and bounced down. When is the danged thing going to break through? Who knows? But you may be able to make some money while you wait.

Significantly, when it has bounced down from the 39.00 – 39.50 resistance level it has done so making higher lows, narrowing into an ever tighter range that now is between the aforementioned 39.00 – 39.50 upside and 35.50 on the downside. Something's gotta give, yes?

So grab yourself by the throat and try this glove on for size. Buy 1 ABX January 41 call for 2.80 and buy 1 ABX January 37.50 put for 2.60. The total debit is 5.40 per spread or $540. The neat thing is, between now and January option expiration you may be able to make money on both sides of this strangle (that's what it's called). Personally, my bet is that gold pops up a bit more (or not) and drops enough to scare some late comers off. When gold drops, sell the put at a profit and hold the call, because by January (if you're a gold bug) you'll be betting that ABX will be above 41.00.

……but wait a minute. If the trade costs me $540 per strangle doesn't ABX need to be above 41.00 for me to make a profit…..especially if my puts expire worthless? You bet; and I like to get paid to trade . So here's what you do. Sell 4 ABX January 35 puts for 1.65 each (or $660). That should put a little jingle in your pocket while you wait for the trade to develop. 

So what's the risk if you do this? (After all, trading is risky.) If ABX falls below 35.00 by January option expiration you will be the proud owner of 400 shares at about 35.00 a share regardless of how low ABX may go.

Question #1……..what are the odds of that happening within the next 100 days?

Question #2……..would you mind owning 400 shares of ABX at 35.00 a share…if you're a gold bug? Heck, it even pays a dividend.

……..as I said, if you're a novice with options do this on paper and follow it day by day because a time will come when you'll want to sell the 37.50 puts..at a profit . If you actually do this trade and you become the owner of 400 shares, let me know; and we can visit about what to do with 400 shares of Barrick Gold.

…..oh…..I almost forgot . What if gold goes straight to the moon in the next 100 days? Well shewt, your January 41 call (that cost you nothing) will be worth its weight in……you get the idea.

I should add, you can fiddle with the strike prices and the number of puts you sell (perhaps you only want to sell 2 puts, etc.) to structure this trade to your own risk tolerance. Have fun with it.

Great questions……and you have the answers (which we'll get to in a second ). I chose ABX because it jumped out at me. I didn't look at charts for the other miners you listed. Depending upon your own analysis you could definitely apply this trade to other stocks (not just metals, either). But remember, you have to be content with the possibility of owning whichever stock you select in whatever quantity and at whatever price you choose for selling the puts.

In order to be thorough, you should definitely compare the basic idea with other candidates. Let's focus on two of the three you mentioned…..GG and KGC. Between ABX, GG and KGC how do you tell which of the three would be the best choice of the three to do this trade presently, using P&F relative strength analysis????? (Ain't this fun? )

I'm no expert at P&F, so let's turn this into a teaser. Which of these three stocks would be the best bet from a RS perspective using the P&F method? (I know which one I'd pick ).

After we pick the stock, we'll do the options……we have some time.

Hey Darrell, as always your suggestions on gold miners get my attention as you certainly have an excellent feel for what spins straw into………well, gold. But I think we need to distinguish between the very diiferent kinds of companies we're discussing here (and I realize that you didn't pick them). As you know there's a world of difference between explorers and miners that are in production or developing production with proven resources in the ground. The difference lies in the relative risks associated with investing in speculative companies that (as yet) have no gold….and those that do.

With that said, let's talk about some of the companies you mentioned. EGI just broke into an up trend and is just a bit overbought. It's weekly momentum is recently negative. It is a strong 5 for 5 technically, so since this trades no options I'd like to see it dip back to 2.25 or better on the momentum weakness before I'd be a buyer. I know nothing about the fundamentals.

Unfortunately, OSK-T would be stricken from my list for technical reasons. Although no longer overbought, it is also not a bargain. Additionally, both weekly and monthly momentum readings are negative; and I'd be looking for this back near 5.50 support before I'd be interested due to recent long term momentum weakness. Again, I know nothing about the fundamentals.

The one you mentioned that intrigues me is LRR-T, but only in a comparative sense. Please compare LLR to GQC-V, a stock that I hold extensively. http://www.goldquestcorp.com/s/Home.asp

Both companies mine the DR; and that's why I say compare them. GQC also wholly owns an historic Spanish silver project. So far, GQC has gotten little attention. I'm interested in your input. I'm not trading GQC……holding as a long term "50 bagger" speculation; and my stake has already nearly doubled at .15 per share.

Dang it asafp, TBT has its own thread.

How can we keep the species straight when you cross pollinate our posts?

……….are you saying "buy no gold shares"? That's mighty contrarian of you. If everyone listens to you there will be NO PRECIOUS METALS BUBBLE!!!!!!!!!

Darrell said:

I can't help on options, as I have not had time to learn them; however; I like OSK.TO for many reasons. see earlier posts, I like EGI because of their involvement in Mong. w/ Ivanhoe and their new government tax law there and their other operations. I have sold CMIN and MNEAk because of local and development problems not previously addressed, but changes in management has stirred some new interest for some investors.  I'm looking hard at a different one but would like some help with other views, LRR.TO, because rumors of near mine operations and holdings. I ownOSK.TO, EGI and have took profits from those mentioned above.

Darrell:

LRR.TO's symbol is LGCFF and I can't find it on Dorsey Wright. That means it does not have a 5-year trading history.CMIN's DWA chart reads trading above bullish support (good), relative strength against the market on a buy (good), relative strength in a column of o'x (not good), and weekly momentum negative ( 3 weeks). So it still looks ok. MNEAF is 0 for 5 on technicals-you are probably wise to take profit on it.

Will

Will, if you look at my posts, most are basically small-caps, some unknown, etc. I use my Scottrade to trade in smalls because I believe that the gains are so much greater there, like spreads GQC at 0.15. I believe that the highest price stock in this thread that I've mentioned is OSK.TO. I figure that I can put a $1000 dollars in a GQC and hopefully turn it into $5000 or more in a short time.  Remember, I bought BEXP and NOG at $4 and sold for $16+, I bought PPY.V at 0.25 and sold at $6 and DNDN at $2.55 and still hold. I rebought BEXP and NOG because that's the confidence I have in the Bakken and these companies and the price fell to a point where I felt I could make money. And by doing it like that, I think I'm doing what spread, stockcrazy, wwp, spread and others are trying to teach this dummy to do.  Besides, now I'm playing with their money after I take mine out. Yes, I've made a lot of mistakes, I sold HUN for $6+ after almost doubling and damn if they didn't run to $9= and the same for HEV, but I didn't lose, so I guess I'm alright. But the best thing is, I've got great teachers and am learning…..WIN, WIN.  PS. Sometimes you have to be a contrarion.

Post edited 8:33 pm – October 11, 2009 by Will

Will said:

spreadtrader said:

In order to be thorough, you should definitely compare the basic idea with other candidates. Let's focus on two of the three you mentioned…..GG and KGC. Between ABX, GG and KGC how do you tell which of the three would be the best choice of the three to do this trade presently, using P&F relative strength analysis????? (Ain't this fun? )

I'm no expert at P&F, so let's turn this into a teaser. Which of these three stocks would be the best bet from a RS perspective using the P&F method? (I know which one I'd pick ).

After we pick the stock, we'll do the options……we have some time.

---

Here is what DWA has to say about KGC: Trading above bullish support, relative strength against the market is on a buy, relative strength chart is in a column of x's and weekly momentum turned negative on 9/25/09 (3 weeks). Broke a spread quadruple top on 9/3/09.

ABX: Broke a triple top on 9/2/09. Trading above bullish support, relative strength against the market is on a sell and relative strength is in a column of o's. Weekly momentum turned negative on 9/25/09 (3 weeks)

GG: Started a shakeout on the reversal to Xs on 10/16/09 (what is the significance of this?). Trading above bullish support, relative strength against the market is on a buy and relative strength chart is in a col of o's. Weekly momentum turned negative on 10/2/09 (1 week).

Based on these, I would pick KGC since it is 4 out of 5. ABX is 1 out of 5 and GG is 2 out of 5.

Any comments?

Will said:

Post edited 8:33 pm – October 11, 2009 by Will

---

Will said:

---

Here is what DWA has to say about KGC: Trading above bullish support, relative strength against the market is on a buy, relative strength chart is in a column of x's and weekly momentum turned negative on 9/25/09 (3 weeks). Broke a spread quadruple top on 9/3/09.

ABX: Broke a triple top on 9/2/09. Trading above bullish support, relative strength against the market is on a sell and relative strength is in a column of o's. Weekly momentum turned negative on 9/25/09 (3 weeks)

GG: Started a shakeout on the reversal to Xs on 10/16/09 (what is the significance of this?). Trading above bullish support, relative strength against the market is on a buy and relative strength chart is in a col of o's. Weekly momentum turned negative on 10/2/09 (1 week).

Based on these, I would pick KGC since it is 4 out of 5. ABX is 1 out of 5 and GG is 2 out of 5.

Any comments?

---

Will,

I have both GG and KGC as 3 for 5 on my computer screen. However, that's not really what I'm referring to when comparing these stocks. DWA has a method for comparing the RS of two or more stocks. Here's what you do:

1. Bring up the chart of a stock that you want to compare (KGC) and select the "Smart Chart" link feature;

2. Next to "Type of Chart" select the "RS (%)" radio button;

3. In the box to the right of that item type in the symbol for the stock you want to compare it to (GG);

4. Click on "Get Chart".

That in turn brings up a relative strength chart. You follow the column (X's or O's) and not the signal. If the RS chart shows a column of X's the primary chart you selected (KGC) is the stronger RS stock. On the other hand, if you see a column of O's, the stock whose symbol you typed into the "Smart Chart" parameters (GG) is stronger. If you do that with KGC and GG you'll see that GG is the stronger RS stock.

This is another valuable tool from DWA.

P.S. A "shakeout" is a P&F chart pattern. Go back to the tutorial and check it out.

ST:

You are right. GG is a stronger stock than KGC. I did a comparison between KGC and ABX and it turns out that KGC is the stronger stock. That means GG is the strongest of the three. I wouldn't have guess that.

Here's some interesting reading. Not really the article, but the comments following it.

Your dollars are just Monopoly money

Some of the comments refer to gold as being a worthless hunk of metal. So, it's definitely not correct to say that "everyone" is a gold bug. Thusly, we aren't at a major top yet.

There will be a speculative blowoff at some point. "In 1980 or so gold price was 850. For gold to have the same real value in dollar purchasing power today, it would have to be priced at about 2550." Assuming the calculations are correct, $2550 is as good a target price for gold as any. Of course, you can make the case that 1980's economic calamity is a Sunday School picnic compared to what we face today.

I agree on buying the coins but plain old silver rounds will do the job. I am looking for miners and mining opport. daily because as the demand grows, and it is, someone will have to fulfill that demand. We know that the everyday working Germans are buying gold out of ATM's and that China is telling it's people to buy gold and silver, so why would Americans not at least buy 5 or 10% of their savings/investment dollars in metal, well I guess that just leaves more for we that do. Maybe you should point out that at todays prices, they can buy a loaf of bread for a pre-1964 quarter, same as when some of ya'll were kids. If this plays out as it seems to be doing, they will need a $10 bill or more to buy that loaf to feed the kids.

spreadtrader said:

What do you think of FCX? I'm interested, but I either need to get a healthy pullback or start selling ITM puts.

I'm also looking at some smaller tier metals companies like ZINC and TC.

ST:

Your idea of selling ITM puts is to put some money in the bank and in the event the price of FCX drops, the shares of FCX might be put to you and you end up owning shares of FCX at a lower price than what it is right now. Am I right?

Also, I thought the chart of TC looks great.

I agree, silver is the metal of choice both for dollar denominated gains and post-collapse barter.

Additionally, I suggest everybody here learn how to barter, how to negotiate. I suggest the book "Getting to Yes" which will help with win-win negotiations. The other type, distributive negotiations, is where one person wins and one person loses. Win-win negotiations are better for each person, but you can leave money on the table, so to speak, if you don't know how to do such a negotiation.