Trading By the Numbers: Big Edges in Little Gold Mines
On a day when the S&P 500 moved listlessly, with financials gaining and technologies pulling back, some of the biggest moves in the stock market were in gold mining stocks, a number of which closed lower for a second day in a row ahead of trading on Friday.
What is most interesting about these pullbacks is that they are occuring in bull market – as opposed to bear market – territory. While there are occasionally “special situations” in which buying pullbacks in bear market territory can be successful, the data on stocks going back to 1995 suggests that it is the pullbacks in bull market territory that are the ones that more often that not are the better pullbacks to trade.
Active investors and traders watching some of the gold stocks will get the opportunity to see this data again put to the test. For example, among the more aggressive sell-offs in gold miners ahead of trading on Friday is the now four-day retreat in Richmont Mines (RIC).
Shares of RIC dropped by well over 1% on Thursday, finishing in technically oversold territory. The stock’s last trip to oversold territory, back at the beginning of October, resulted in a rally that took the stock higher for seven out of the next eight days.
Also pulling back ahead of trading on Friday were shares of Midway Gold Corp (MDW). MDW has pulled back for three out of the past four sessions. Interestingly, despite this selling, and despite losing more than 3% in Thursday’s session, Midway Gold is not yet technically oversold.
Traders and investors who prefer the more familiar names in the gold mining market may want to keep their eyes on shares of Yamana Gold Inc. (AUY). Shares of AUY have pulled back for two days in a row – three out of the past four – losing just over 1% on Thursday. Note also that AUY finished closer to session highs than session lows, hinting that buyers may have already begun to return to the stock in significant size.
The stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com