In the following chart I have only compared 4 stocks, including AUY, but the same patter can be observed with most of other gold stocks.
Current Positions (September 3rd):
Short BAC @ 16.96
Short TIF @ 35.03
LONG AUY @ 10.28
Wednesday, September 2, 2009
AUY - Looking to go long Gold
Gold rallied today along with all other gold stocks. Most gold stocks today were around 10.00%. This further fuels the fact that we are in a correction. When the market goes down, people run to a safe haven (insurance), gold. Gold, today closed at $979, a level last seen in early June when it peaked and failed to go to $1000. I started looking through several gold stocks, to see if there were any opportunities going long. Most gold stocks broke through some key resistance, and tomorrow we will see if the prices manage to hold and create some support. What I noticed is that almost all gold stocks are near or at their 52 week high, which were last hit when gold had peaked in early June, when Gold was around the same price. All gold stocks but one, AUY (Yamana Gold) like other gold stocks rallied up 10.00%, closing at over $10.00, so 20.00% off its 52 week high which was hit back in early June. Therefore, I believe AUY (Yamana Gold) is lagging and therefore under priced and has the potential for the most upside among gold stocks. Other gold stocks may just hit new 52 week highs, and also go higher if gold continues its trend up, however AUY has the potential to outperform other gold stocks. Although it is true gold stocks do not reflect at 100% just the price action in gold, but this is nonetheless an interesting anomaly. That is why I'm going to try to take a long position with AUY, tomorrow, I'm hoping it pulls back a little bit tomorrow, or at least hopefully remaining around these levels. But there is a good chance it continues higher.
In the following chart I have only compared 4 stocks, including AUY, but the same patter can be observed with most of other gold stocks.
Current Positions (September 3rd):
Short BAC @ 16.96
Short TIF @ 35.03
LONG AUY @ 10.28
In the following chart I have only compared 4 stocks, including AUY, but the same patter can be observed with most of other gold stocks.
Current Positions (September 3rd):
Short BAC @ 16.96
Short TIF @ 35.03
LONG AUY @ 10.28
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Yoel, when you say LONG, do you have a time frame or an exit point in mind?
ReplyDeleteThanks,
DP
I'm a swing trader, therefore I follow the trend on a day to day basis and try to ride it as long as it persists. The moment the trend reverses or my -7.00% stop loss gets triggered I will exit my position and move on to another stock or wait for the next opportunity to get back in. I may hold stocks for a few days and up to 1 month if the stock fluctuates within -6.99% and +4.99% return. Basically I'm applying the trading strategy "Y-Swing" I posted earlier. The reason I went long AUY, is because I'm expecting gold to continue to rise as its trending up along with gold stocks. I mainly chose AUY because I see it as the gold stock with the most potential to outperform others, as its 20% away from it 52 week high compared to other gold stocks who are mostly at their highs. I see AUY as having the potential to go to at least $12.00 and beyond, assuming gold continues higher of course. If I'm wrong, my stop loss order will get triggered, I will take my loss and move on.
ReplyDeleteHi Yoel, how do you think will affect the possible reverse split in the value of C shares?
ReplyDeleteA reverse split usually is meaningless, it's a psychological factor. This does not change the value of your shares. If you own 1000 shares of Citigroup at $5.00, so worth $5000, you will just end up with 500 shares worth $10.00, still worth $5000. Some people think that if the value of C is raised artificially to $10.00 the shares won't seem as cheap as they did, especially if they bought some around let's say $3.00. They will have the impression that they bought more expensive shares than originally intended, and they may feel that they may have lost some potential upside. In reality, the supply will decrease from 54 billion shares outstanding to 27 billion, justifying the higher price. Now you may ask yourself, what is the purpose in doing a reverse split since it doesn't really change anything. The fact is that mutual funds are not allowed to hold stocks worth less than $5.00, and most don't even buy those worth less than $10.00, as they are considered too risky (closer to bankruptcy). In fact, I've made it a rule for myself to never buy stocks under $5.00, since the value of a stock represents its quality and stability rather than looking cheap and having more potential to rise. In fact a stock worth $5.00 or less is closer to $0.00, while the upside for any stock is unlimited. So it doesn't matter what the price of a stock is in terms of its potential to rise. It's no coincidence that Google is worth over $400, it has as much chance to go up 50% by the end of the year as any other stock, technically speaking. Personally I think seeing a reverse split for C may be a good thing, may raise buyer's interest, and C may be perceived to be as a higher quality stock than it is right now.
ReplyDelete