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The Importance of Knowing the Technicals of Mining Stocks

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Technical reading

In addition to correlation studies, there are other indicators that we focus on when considering putting money into mining-based stocks. In this part of our series, we’ll look at call implied volatilities and RSI (relative strength index) levels of Barrick Gold (ABX), AngloGold Ashanti (AU), Kinross Gold (KGC), and Iamgold (IAG).

Volatility analysis

Call implied volatility is used to read the fluctuations in the price of a stock with respect to the fluctuations in the price of its call option. On October 30, 2017, ABX, AU, KGC, and IAG had call implied volatilities of 29.1%, 40.9%, 41.6%, and 44.3%, respectively.

Remember, mining stocks can often be more volatile than the precious metals they represent.

RSI reading

RSI levels are monitored in order to estimate whether a stock has been overbought or oversold. If a stock’s RSI is higher than 70, it could be overbought, and its price could soon fall. If a stock’s RSI is below 30, it may be oversold, and its price might soon rise.

ABX, AU, KGC, and IAG now have RSI levels of 14.8, 53.5, 34.7, and 27.9, respectively. The recent decline in these stock prices has led to a considerable fall in their RSIs.

Notably, the Vaneck Merk Gold Trust (OUNZ) and the PowerShares DB Gold Shares (DGL) have fallen 0.55% and 0.66%, respectively, on a five-day-trailing basis due to the slump in precious metal prices during the past week.

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