What Do the Technicals of Mining Stocks Indicate?


Mar. 22 2018, Published 12:29 p.m. ET

Mining stock analysis

Miners had a good start to 2018 with an upswing in prices due to the revival in precious metals. However, as precious metals slumped after that, so did the mining shares. The revival in precious metals on March 21, 2018, after the FOMC[1. Federal Open Market Committee] hiked interest rates also gave a spark to these mining shares. 

In this part of the series, we’ll look at miners’ RSI levels and implied volatility. The miners we’ve selected for our analysis are Agnico Eagle Mines (AEM), Yamana Gold (AUY), Kinross Gold (KGC), and IamGold (IAG).

These four miners have experienced a fall in their prices over the past 30 trading days. GOLD, ABX, AU, and EGO fell 1.9%, 2.5%, 6.9%, and 5.5%, respectively.

Among the gold and silver funds, the VanEck Vectors Gold Miners ETF (GDX) and the Global X Silver Miners ETF (SIL) have also declined during the last week due to expectations of an interest rate hike. These funds fell 0.51% and 1.4%, respectively, on a trailing-five-day basis.

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Volatility analysis

Implied volatility measures the price fluctuations in an asset given the changes in the price of its call option. GOLD, ABX, AU, and EGO have implied volatilities of 26.9%, 30.0%, 39.3%, and 74.2%, respectively.

RSI readings

A stock’s RSI (relative strength index) level indicates whether it’s overbought or underbought. When a stock’s RSI level is higher than 70, it shows that the stock could be in overbought territory and that its price could fall. When a stock’s RSI level is lower than 30, it indicates that the stock could be oversold and that its price could rise.

GOLD, ABX, AU, and EGO have RSI levels of 63.8, 73.4, 46.2, and 40.0, respectively.


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