Analyzing Miners’ Technical Indicators
Before investors park their money in mining stocks, there are a few key indicators they should consider. Let’s look at the call-implied volatility and RSI (relative strength index) scores for Franco-Nevada (FNV), Eldorado Gold (EGO), Iamgold (IAG), and Harmony Gold (HMY).
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Call-implied volatility is used to read the price fluctuations of a stock’s call option. As of November 7, 2017, Franco-Nevada, Eldorado Gold, Iamgold, and Harmony Gold had call-implied volatilities of 25.5%, 50.4%, 44.3%, and 53.3%, respectively. Mining stocks can be more volatile than their related precious metals.
RSI levels are useful for assessing whether a stock is overbought or oversold. If a stock’s RSI score is higher than 70, it might be overbought and its price might sink. If a stock’s RSI score is below 30, it could be oversold and its price might rise.
Franco-Nevada, Eldorado Gold, Iamgold, and Harmony Gold have RSI scores of 67.1, 11.8, 52.6, and 50, respectively. The recent fall in these stocks’ prices led to a considerable drop in their RSI scores. Low RSI numbers imply that a price recovery could be just around the corner. On a YTD basis, the VanEck Merk Gold ETF (OUNZ) and the iShares MSCI Global Gold Min (RING) have risen 10.5% and 5.4%, respectively, despite the recent slump in mining shares.