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Mining Technical Indicators: What We Can (And Can’t) Assume

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Dec. 4 2020, Updated 10:53 a.m. ET

Precious metal funds

As we look at the recent performance of mining shares, we also have to examine the volatility figures and RSI (relative strength index) levels of the individual stocks, as these also play crucial roles in the investor buying process. In particular, investors should watch RSI levels in the wake of changing precious metal prices.

Mining funds such as the Vaneck Vectors Junior Gold Miners (GDXJ) and the Global X Silver Miners Fund (SIL) rose substantially at the beginning of 2017 due to the revival among precious metals at that time. But more recently, in the past month, these funds and mining shares started to suffer.

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Implied volatility

Call-implied volatility takes into account the changes in an asset’s price due to variations in the price of its call option. During times of global and economic turbulence, volatility is higher than in a stagnant economy.

As of March 24, the volatilities of Cia De Minas Buenaventura (BVN), AngloGold Ashanti (AU), Hecla Mining (HL), and Eldorado Gold (EGO) were 48.5%, 51.3%, 49.1%, and 53%, respectively. Remember, mining company volatility is often higher than precious metal volatility.

RSI levels

A 14-day RSI above 70 indicates the possibility of a downward movement in a stock’s price. A level below 30 shows the possibility of an upward movement in a stock’s price.

The RSI levels of the four mining giants mentioned above have risen due to higher stock prices. Cia De Minas, AngloGold, Hecla, and Eldorado had RSI levels of 64.2, 65.6, 52.2, and 65.6, respectively. And with the rise in the prices of these mining shares, the RSI levels of the stocks have increased.

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