Last week saw broad markets finally break out of a consolidation zone, while precious metals were slammed hard to end the week. It will be interesting to see if this is the beginning of a push to new highs for US markets or if it is just another whipsaw in what has been a volatile market. If the broad markets continue to rally, I think we can expect further weakness in precious metals stocks, which are due for a larger correction after having had a really nice run. On the other hand, if the broad market rolls over again, the correction in precious metals may be a brief one. In light of this dynamic, I have overhauled the watch-list to accommodate either of these scenarios.
I have kept what I feel are the best looking gold and silver mining stocks in case we see some reversals but at least half of the new watch-list is from other sectors. Marijuana stocks rallied a bit last week, so I have included a few of those names. The beleaguered energy sector has also been showing some signs of life, so I also added a few of the stronger looking companies from that sector.
It remains to be seen whether these sectors are just having an oversold bounce or whether it turns into a more lasting rally. Financial stocks have yet to turn up in a meaningful way, so until that happens I think we need to adopt a cautious view about the general markets. Here is the new list:
Buy = could be bought right now
Watch = would be a buy on a reversal or breakout
Hold = still some upside potential but not a buy at present
Profits = trade is extended and could be sold for profits or partial profits
I have included a few charts below:
This is a daily time-frame chart of the TSX gold mining index. All of our mining stocks look similar to this. Patience is needed to determine whether this is a quick dip or a more sustained correction.
This the gold mining index on the weekly time-frame. You can see that it is very overbought, which suggests that a larger correction could be in order.
APHA made a higher low and broke up across the flattening 50 dma. Aggressive traders could buy it right here, while cautious traders should wait for a new high above $10.
Another weed stock with a similar bottoming pattern, FIRE also looks like it wants to break out.
CLS is an electronics manufacturer. This looks like a nice low risk set-up.
BDT is another nice low-risk set-up coming out of a nice long basing pattern.
RCH recently broke above its mini downtrend. With the stop nearby, this is a very low risk trade.
ACES looks similar to RCH above. This is a nice low risk entry.
VII just broke to a new high out of a textbook basing pattern. Energy is definitely overdue for a rally.
BNP looks similar and could be bought right here.
I have included NDM here because it has been one of the stronger precious metal companies during this downturn. It may take a while but I think this company has a huge upside.