Friday, February 13, 2009
Getting ready for the next move
I am short gold stocks right now despite my wild bullishness on the sector. However, once I cover my shorts on gold miners and KSS, I will be going all in on the long side. I am patiently watching charts of the major gold indices ($XAU, $HUI and GDX/$GDM) and focusing on two stocks that I love in the gold mining sector: Goldcorp (GG) and Royal Gold (RGLD).
Goldcorp and GDX have a ways to go in their corrections, but I want to focus on RGLD. This is a crazy stock and it is going to go to the moon over the next few years. It is a gold royalty company, meaning it is basically a banking operation backed by the gold output of mines that it finances. In other words, it is a sound bank based on hard currency in a world of unsound banking based on fractional reserve lending of unstable fiat currencies. It doesn't bear the risks of mining but bears the fruit of miners' labor.
I have covered the long term chart and long-term breakout of this stock before, which is the important big picture. Once you understand the big picture and realize how great of an opportunity this stock is, it is just a matter of timing your entry, though you can buy this stock at any time over the next month and you won't regret it.
To the charts, yo (first a 4 year weekly chart then a 6 month daily chart below it):
A healthy and normal pullback to the breakout point gives the stock a resting period so it can build up energy for the next strong upward thrust. Everything is textbook so far in RGLD and the fundamentals backing the stock are INSANELY BULLISH.
If anyone is reading this and thinking about buying this stock, do it! This stock may well double within a few months from the 40 range. I'll be using long term options to leverage the profits once we get to my anticipated buy point. Buy the way, this stock is also a great buy and hold stock for those with a longer-term investment horizon. Not only will it appreciate in price tremendously, but the dividend yield will start skyrocketing soon (assuming you get in now while the price is still low). I may be buying RGLD as early as next week and will be watching it like a hawk for an entry point once we get under $40/share.