Tiptoeing Back into the Miners

Precious metals expert Michael Ballanger explains why he sees a “bottom in the cards,” and outlines a trading plan to capitalize on the turnaround.

Cutting directly to the chase, the correction in the gold and silver stocks and, more importantly for us, the miners (GDXJ) is rapidly coming to a close. Without embarking on a flight of verbosity and overstatement, here in a nutshell is why I see a bottom in the cards—and possibly a solid, tradeable bottom.

1. Sentiment: In January of this year, I couldn’t even get a meeting with any fund manager or investment banker, let alone secure an order for financing. By July, I had those same people begging me for a piece of ANY gold/silver-related financing I could offer. Mining brokers went from the outhouse to the penthouse in record time, and with unprecedented velocity by the summer of 2016. Today, in October, we are right back to where we were in January. Those big managers of other people’s money now own “too many issues,” the quality of which was noticeably suspect in the late stages of the January-July advance. When my phone stops ringing for at least two weeks, I know we are near the lows.

2. Relative Strength (“RSI”): Nothing more to say here other than “Observe the chart posted above.”

3. COT: The Commitment of Traders report for tomorrow is going to see another sharp improvement as gold open interest has shrunk to 500,328, and that is down from 544,824 on October 4. This is the large Commercials unwinding their massive short position in gold futures and is normally a precursor for a reversal. However, it is not to be used as a timing tool as the unwinding can take weeks to play out.

4. Deal Flow: The number of financings for the junior exploration companies has …read more

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