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Chart in Focus: Miners’ Technical Indicators

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Readings of the miners

Variations in precious metals are often closely tracked by mining shares. When investors intend to enter mining shares, they need to analyze several key technical indicators.

We’ll look at two important technical indicators—volatility and RSI levels for major miners Franco Nevada (FNV), Randgold Resources (GOLD), Yamana Gold (AUY), and AngloGold Ashanti (AU).

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Volatility measure

Call-implied volatility is a measurement tool of the variations in an asset’s price when it comes to changes in the price of its call option. On September 1, 2017, Franco-Nevada, Randgold Resources, Yamana, and AngloGold had volatilities of 34.0%, 37.9%, 58.2%, and 51.5%, respectively. The volatility of the mining stocks is usually greater than the volatilities of precious metals.

RSI

RSI (relative strength index) indicates whether a stock has been overbought or oversold. If a stock’s RSI is greater than 70, it may be overbought and its price may decline. If a stock’s RSI is lower than 30, it could be oversold and could move upward.

The RSI levels for the miners mentioned above have recently witnessed revivals. Franco-Nevada, Randgold Resources, Yamana, and AngloGold have RSI levels of 72.9, 75.9, 74.1, and 57.8, respectively.

Among the mining funds, the VanEck Vectors Junior Gold Miners ETF (GDXJ) and the Sprott Gold Miners ETF (SGDM) are also affected by changes in precious metal prices. These two funds have increased about 6.8% and 4.2%, respectively, on a five-day trailing basis.

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