It’s unclear if a bottom is forming in a number of gold stocks, but a few price chart indicators are providing positive divergence signals. Momentum downward for these equities appears to be declining or to have stopped completely – a positive signal, unseen for a few weeks.
More clarity is required, to be certain, but it’s interesting to see how this trend is developing in these four gold stocks:
Equinox Gold Corp. (NYSEAMERICAN: EQX) is a Canadian gold miner now trading for about half its book value with a price-to-earnings (PE) ratio of 2.88. This year’s earnings-per-share (EPS) are up by 150%, but EQX has no past 5-year EPS record to compare. Its level of long-term debt is exceeded by shareholder equity. Here’s the daily chart:
Note how the drop from the mid-May price low to the mid-July price low is accompanied by a higher July reading on the relative strength indicator (RSI). This move is confirmed by the higher low over the same time span on the moving average convergence/divergence chart (MACD). The drop in downward momentum is measurable.
Royal Gold Inc. (NASDAQ: RGLD) is headquartered in Denver, Colorado, with offices in Vancouver, British Columbia, Toronto, Ontario and Luzern, Switzerland. The company trades with a PE ratio of 23 and at 2.56 times book value. EPS is off this year by 54.30%; the past 5-year EPS growth rate is 6.30%. Royal Gold carries no long-term debt.
The daily price chart is here:
The RSI shows how the move downward in price loses momentum from June through July. The MACD confirms the RSI.
Sibanye Stillwater (NYSE: SBSW) is a South African-based gold miner that also produces significant platinum, palladium and other metals. Now trading at 1.46 times book value with a PE ratio of 3.65, the company’s earnings this year are up by 7% and the past 5-year EPS is a positive 39.20%. Sibanye Stillwater is paying a 13.10% dividend right now.
Here’s the daily price chart:
Both the RSI and the MACD indicator agree: downward momentum is slowing considerably.
Yamana Gold Inc. (NYSE: AUY) is headquartered in Toronto, Ontario, with operations in Canada, Brazil, Chile and Argentina. The stock is trading at just above book value (1.08x) with a PE ratio of 31.72. This year’s EPS is a negative 28.40%. The past 5-year EPS comes in at a positive 20.10%. Yamana pays a 2.41% dividend.
The daily price chart looks like this:
Although there is no confirmation of real momentum loss on the technical indicators – in the way it’s seen on the above three charts – it’s today’s candlestick that seems revealing. That’s a solid move higher, and it seems clear Yamana wants to break back above $5.
These price chart indicators by themselves are not enough to lead to decision making – an investor would want to see a number of other indicators lining up as well. These indicators are a “heads up” about what may be developing for these stocks and maybe for other stocks in the sector.
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Not investment advice. For educational purposes only.
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