The BMO junior gold ETF is a barometer of sorts to keep an eye on. These are small gold exploration and mining companies with high beta’s relative to the big boys. If they stumble there is trouble ahead. In our June 6th blog we drew a line in the sand, go above $17 and things look good, stay below it and things remain problematic. Things may still change for the better , but for now stand aside.
The usual then and now;
Then was in January of this year and now is yesterday. As you can see the main feature in the old chart is the wedge shaped “diagonal triangle” in EW lingo. The very same structure that we recently pointed out exists in the Dow, the S&P and the Nasdaq. We were not perfect being a dollar or two too early but certainly a lot better than the technical editorial in the Globe & Mail that was looking for $37 (provided $24.50 did not break). The dive so far appears to be a first wave followed by a wave two, putting us presently in wave 3. Judging by the RSI and MACD things may be – temporarily – overdone. Ultimately these structures are resolved by a drop back to the base, roughly $17. No guarantee that it will stop there, as in the big picture the stock should retrace the entire B-wave, that is make a new low below $11!
Then and now;
AA beat expectations yesterday but then adjusted its outlook citing the situation in China. Enough to drive you to drink. $6 remains our target but it may be a little too high. See the previous blog for the big picture.
Franco Nevada is a gold royalty and stream company. It is essentially a holding company that does not itself have operations that can go wrong, or costs than can go up etc.etc. It’s performance has been spectacular, certainly the last few years. It is up from a little over $10 to $60 in a 4 year period. In the Bigchart it is compared to the XAU, the Philadelphia Gold index of 13 or so major gold producers. They barely moved over that period whereas Franco is up a tidy 300%. Gold itself has done very little over the past year so this stock has outperformed the metal itself and the gold miners. It may have completed 5 waves up, it is now outside its channel and the technical indicators such as RSI and MACD suggest an overbought condition. We would sell the stock, or at least keep a trailing stop-loss underneath this stock.