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Are Miners Beating Their 100-Day Moving Averages?

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Miners follow the metals

Mining companies reversed their 2015 losses during the first few months of 2016 and posted substantial gains. The correlation between mining stocks and gold remains high. Most mining shares have been rising due the rebound in gold and silver over the past few weeks.

Alamos Gold (AGI), Pan American Silver (PAAS), Eldorado Gold (EGO), and IAMGOLD (IAG) have risen 133.1%, 128%, 40.4%, and 161.3%, respectively, on a YTD (year-to-date) basis.

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The VanEck Vectors Junior Gold Miners ETF (GDXJ) has risen 104.4% YTD. Due to the sudden substantial rises in mining stocks, many are trading close to or above their target prices. Although Pan American Silver and Eldorado Gold are still below their target prices, Alamos Gold and IAMGOLD are trading above their target prices, which suggests a possible drop in price.

Technical indicators

Alamos Gold, Pan American Silver, Eldorado Gold, and IAMGold are trading at premiums of 38.7%, 26.3%, 17.5%, and 3.1%, respectively, to their 100-day moving averages. A massive premium over a trading price suggests a possible drop in price.

The RSI (relative strength index) readings for these four miners and most other miners have risen considerably due to gold’s price rise. An RSI level above 70 indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise. GDXJ’s RSI reading is 59. Most miners have maintained an RSI reading in the range of 50–60 over the past few days.

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