Tuesday, October 2, 2012

Is there a Golden Cross to be Unearthed in the Gold Miners?

From a technical perspective, one of the major buy indicators is a Golden Cross, when a short term indicator, moving up on a chart crosses a longer term indicator, specifically when the 50 day moving average crosses the 200 day moving average.

There are a lot of articles about a recent Golden Cross in the price of gold, the actual physical metal as represented by the SPDR Gold Shares, (GLD) ETF, but there is an impending golden cross in the gold miners as well. 

Two of the largest gold stocks, Barrick Gold (ABX) and Goldcorp, (GG) have been an uptrend, and barring a disastrous collapse in share price, are almost guaranteed to hit a golden cross in the next few weeks.  It’s a function of mathematics, since the 50 day will move faster than the 200 if there has been a significant recent move in the stock.

Goldcorp’s 50 day MA as of October 1 is 40.31 and the 200 is 41.50.  These numbers have been getting closer.  If I extrapolate this based on an unchanged share price for the next trading sessions, the 50 and 200 will equal in seven days.   The Golden Cross will happen on October 9.  If the price changes, it will still happen, but may vary by a day or two.  The only thing that might prevent the Cross is a catastrophic drop in the price. 

Barrick stock has been on a similar trajectory, but it had fallen further and will take longer to reach the Golden Cross.  If the stock price is unchanged, it will take 22 days for the 50 to cross the 200.  The longer it takes the more risk of a substantial price change, so investors should continue to monitor the price.

Whether you as an investor believe in this kind of technical indicator is a personal trading decision, but mathematical basis for the impending Golden Cross has already been set.  If this indicator signals a buy for you, it may be worth making that decision early rather than late. 

Monday, October 1, 2012

Mega Cap Power Rankings Week Ending 9/30/12

A crazy, upside down week for the largest of the big caps.  Everyone's favorite tech stocks took it on the chin from September 24 to 28, 2012.

10.  Apple (AAPL) - Yes, it's wonderful, unstoppable, unless it shoots itself in the foot.  A drop of 4.7% this week.  It couldn't find its way through its own map crisis.

9.  Microsoft (MSFT) 4.6% drop.  Hmmm.  Very close to Apple.  You wouldn't think these would trade in tandem now.  Look for a nice rebound in Mr. Softie if Apple recovers.

8. Royal Dutch Shell (RDS-A) - Down 3.0%.  Another bad week for the Dutch.  No power here.

7.  Petro China (PTR) - More worries for the oil sector, even from the Far East.  Down 1.5%.

6. Chevron (CVX )   Seems to be theme.  Down 1.1%.  I see little reason that this is going to turn around suddenly.

5.  WalMart (WMT) - A down week for the overall market makes it's retail leader fall 0.5%.  Steady and stable, a good long term play, you shouldn't worry about a one week move.

4. ExxonMobil (XOM) - Once again the best of a bad neighborhood.  Down 0.5%,  Worry that one is going to catch up to the rest of the group.

3. China Mobile (CHL) - Up slightly at 0.6%,  Still running strong. Very little not to like here, unless the whole of China crashes, instead of just real estate and materials.

2. IBM (IBM) - weathered the tech storm nicely with a gain of 0.7%. Gained ground on Apple and Microsoft.  They are really two different business models now.  IBM more consistent and stable, a better long term holding. You don't have to be as concerned about picking a great entry point.

1. General Electric (GE) - A nice 0.8% return on a tough week.  Number one two weeks in a row.  It's been down so long it looks up.